The Impact of Contextual and Process Factors On The Evaluation of Activity Based Costing Systems 1999 Accounting Organizations and Society

Accounting, Organizations and Society 24 (1999) 525559
www.elsevier.com/locate/aos
The impact of contextual and process factors on the

evaluation of activity-based costing systems$
Shannon W. Anderson a,*, S. Mark Young b
b
a
Accounting Department, University of Michigan Business School, Ann Arbor, MI 48109, USA
Leventhal School of Accounting, University of Southern California, Los Angeles, CA 90089, USA
Abstract
This paper investigates associations between evaluations of activity based costing (ABC) systems, contextual factors,
and factors related to the ABC implementation process using interview and survey data from 21 eld research sites of
two rms. Structural equation modeling is used to investigate the t of a model of organizational change with the data.
The results support the proposed model; however, the signicance of specic factors is sensitive to the evaluation criterion. The model is stable across rms and respondents, but is sensitive to the maturity of the ABC system. # 1999
Elsevier Science Ltd. All rights reserved.
Early proponents of ABC claimed superiority

over traditional costing methods that stemmed
from employing causally related ``cost drivers'' to
assign common costs to business activities, products and services (Cooper, 1988; Cooper &
Kaplan, 1988). Later studies argued that a judiciously designed ABC system provides eective
behavioral control (Cooper & Kaplan, 1991;
Cooper & Turney, 1990; Foster & Gupta, 1990.
Evidence of ABC implementation failures1 has
caused researchers to suggest that achieving either
objective depends critically on organizational and
technical factors (Anderson, 1995; Malmi, 1997)
and recent empirical evidence supports this view
(Chenhall & Langeld-Smith, 1998; Foster &

Swenson, 1997; Gosselin, 1997; Innes & Mitchell,
1995; Krumwiede, 1998; McGowan & Klammer,
1997; Shields, 1995). This paper combines the
results of previous studies with theory on organizational change to propose a structural model of
the relation between evaluations of ABC systems,
contextual factors and factors related to the ABC
implementation process.
We evaluate the model's descriptive validity
using survey data from managers and system
developers associated with 21 implementation
projects in two automobile manufacturers. Structural equation modeling (SEM) is used to investigate the inuence of the contextual environment
and the implementation process on evaluations of
$
The authors are not permitted to redistribute the data of
this study without permission of the participating rms.
* Corresponding author. Tel.: +1-734-647-3308; fax: +1734-936-8716.
E-mail address: swanders@umich.edu (S.W. Anderson)
1
By some estimates only 10% of rms that adopt ABC
continue to use it (Ness & Cucuzza, 1995). In reviews of international studies of ABC adoption, Innes and Mitchell (1995);
and Chenhall and Langeld-Smith (1998) nd adoption rates
generally less than 14%.
1. Introduction
0361-3682/99/$ - see front matter # 1999 Elsevier Science Ltd. All rights reserved.
PII: S0361-3682(99)00018-5
526
S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525559
the ABC system and the inuence of the contextual environment on the ABC implementation
process. The data are consistent with the proposed
structural model. After establishing a plausible
model structure, we investigate its applicability to
dierent evaluation criteria and its stability across
dierent sub-groups in our sample. Thus, the
research contributes a unied investigation of
three aspects of ABC implementation: model
structure; variable denition and measurement; and,
model stability.
We test a structural relation between contextual
variables, process variables and ABC system evaluations that is hypothesized in ``process theories''
of ABC implementation (Anderson, 1995; Argyris
& Kaplan, 1994; Kaplan, 1990; Shields & Young,
1989). By separating the inuence of the contextual environment on the ABC implementation
project from its inuence on the evaluation of the
ABC system, we extend previous studies that
document correlation between ABC project outcomes and contextual and process factors. In a
case study of an ABC project that did not survive, Malmi (1997) posits that implementation
failures are related more to exogenous contextual
factors than to the process of implementation
that even good implementation processes fail on
barren ground. Our results support this observation and point to specic exogenous factors that
make ABC less suitable and that are unlikely to
be remedied by improving the implementation
process.
The study contributes to the area of variable
denition and measurement through eld research
and the use of multiple data collection methods.
Multiple modes of data collection (e.g. surveys
and personal interviews) provide the opportunity
to address the question: What is meant by ``success'' in ABC implementation? A danger of asking
managers to rate ABC implementation success
without specifying the denition of success is failure to detect cases in which individuals hold different views on the denition of success but share
views on attainment of a particular dimension of
success. In light of evidence that success in ABC
implementation is multi-dimensional (Cooper,
Kaplan, Maisel, Morrissey & Oehm, 1992) with
each dimension having somewhat dierent corre-
lates (Foster & Swenson, 1997), it is appropriate

to ask what criteria respondents use in evaluating
ABC. Content analysis of interviews conducted
with survey respondents reveals two dominant
views of what denes an eective ABC system:
whether ABC data are used in product cost
reduction or process improvement; and, whether
ABC data are more accurate than data from the
traditional cost system. Further investigation
indicates that the respondent's job is a predictor of
which view is held. Previous studies explore determinants of dierent evaluation measures (Foster &
Swenson, 1997) and document respondent-eects
on evaluation levels (McGowan & Klammer, 1997).
This study investigates whether dierent evaluation
measures correspond to dierent views on appropriate evaluation criteria. Then, using survey data
we estimate simultaneously the contextual and
process determinants of respondents' evaluations
of the ABC systems according to the operative
criteria. Simultaneous estimation methods allow
us to consider whether the factors that inuence
dierent evaluation measures are common
(suggesting that all criteria may be achieved) or
mutually exclusive (suggesting that success
along one dimension is achieved at the expense of
another).
A nal contribution of this research is investigation of the stability of the relation between evaluations of ABC implementation and factors
related to context and the implementation process.
The research design and sampling plan permit
investigation of three potential sources of model
instability: company eects, respondent eects
and eects of ABC system maturity. Company
eects are examined in the spirit of sensitivity
analysis, to explore the degree to which the results
generalize. We can not address the degree to which
results generalize to dierent industry settings;
however, we nd few dierences between the rms
and reject the hypothesis that a rm-specic model
is warranted. The exploration of respondent
eects, specically of dierences between managers and ABC system developers, is a unique
contribution of this study.2 Previous research relies
almost exclusively on data taken from accounting
professionals. These people may hold dierent views
on the ABC system as a result of proximity to or
responsibility for ABC implementation, or as a

result of the degree to which ABC threatens or reinforces their professional standing. The results indicate dierences in what determines evaluations of
the ABC system between managers and ABC system
developers; however, statistical tests reject the
hypothesis that a model that distinguishes between
respondent types improves model t. Exploration of
eects of ABC system maturity on model stability
continues the investigation of ``stages'' of ABC
implementation in Anderson (1995) and Krumwiede (1998). The results indicate signicant dierences in determinants of respondents' evaluation of
ABC as a function of ABC system maturity. Thus,
the maturity-specic model ts the data better than
a model that omits this factor.
Section 2 reviews the literature and develops the
research questions. Section 3 describes the
research sites and data collection methods.
Variable measures and descriptive statistics are
presented in Section 4. Evidence on the relation
between ABC system evaluations and contextual
and process variables is presented in Section 5.
The stability of the model between dierent
companies, respondents and ABC systems of
diering maturity is investigated in Section 6.
Section 7 summarizes the contributions of the
research and discusses avenues for future investigation.
2. Associations between context, process and
evaluations of ABC systems
2.1. Summary of prior research
Practitioner accounts of ABC projects and case
study research on determinants of project outcomes
have long associated technical and behavioral factors
with ABC implementation success (Beaujon &
Singhal, 1990; Foster & Gupta, 1990; Cooper,
2
McGowan and Klammer (1997) document a signicant
dierence in the level of satisfaction with ABC between those
who developed the ABC data and those who use the data. They
assume a common (stable) model for both populations with
dierences reected only in a shift in the mean level of satisfaction.
527
1990; Cooper et al., 1992; Drumheller, 1993; Eiler

& Campi, 1990; Foster & Gupta, 1990; Haedicke
& Feil, 1991; Jones, 1991; Kleinsorge & Tanner,
1991; Richards, 1987; Shields & Young, 1989;
Stokes & Lawrimore, 1989). Anderson (1995) surveys the literature on ABC and information technology implementation and compiles ve
categories of 22 variables that are implicated in
ABC project outcomes. More recent empirical
studies provide evidence on the correlation
between these factors and ABC implementation
eectiveness and introduce ve new variables
(Chenhall & Langeld-Smith, 1998; Foster &
Swenson, 1997; Gosselin, 1997; Innes & Mitchell,
1995; Krumwiede, 1998; Malmi, 1997; McGowan
& Klammer, 1997; Shields, 1995). Table 1 updates
Anderson's (1995) list of variables hypothesized to
inuence ABC system evaluations (column 1) and
summarizes the statistical relations documented in
these studies (column 3).
A diculty in specifying the hypothesized eect
of each factor on evaluations of ABC systems is
that each study is dierent in ways that draw into
question comparability of results. For example,
Anderson (1995), Gosselin (1997) and Krumwiede
(1998) distinguish dierent stages of ABC implementation and nd evidence that dierent factors
inuence ``success'' at each stage. Foster and
Swenson (1997), McGowan and Klammer (1997)
and Malmi (1997) study specic ABC implementation projects, while other studies gather data
at the rm level. Moreover, Foster and Swenson
document somewhat dierent correlates for four
dierent measures of ABC implementation success. Finally, McGowan and Klammer collect
data from dierent informants at an ABC implementation site and nd evidence of a shift in the
mean level of evaluation that is associated with
respondents' involvement with the ABC project.
Other studies rely almost exclusively on informants
from accounting functions (of the rm or the ABC
site). In sum, comparing empirical studies of the
determinants of ABC implementation eectiveness
requires strong assumptions about invariance of
these relations across time, respondent groups,
measures of eectiveness and units of analysis.
In spite of caveats concerning comparability of
prior studies, the research ndings are remarkably
Task characteristics
Uncertainity/lack of goal clarity
Variety
Worker autonomy
Worker responsibility/personal risk
Resource adequacy
Availability of ABC software
A,B,E,H
A
A
A
B,C,E
B,C
,0,,0
+
+
+,+,+
0,+
+,+,+,+,+
A,B,C,E,H,I
+
+,+,+,+
+,+,+,+,+
+,+
,0
+
+
0,+
+,+,+,+,+,0,+
,
+,0,+,+
+,+,0
A,D
A,B
D
D
B,C
A,B,C,E,F,G,H
A
A,B,E,G
A,B,E,G,H
Organizational factors
Centralization
Functional specialization
Formalization/job standardization
Vertical dierentiation
Formal support in accounting function
Support
Top management support
Local management support
Local union support
Internal communications
Extrinsic reward systems
ABC training investments
+,+,+,+
+
+,+,
Hypothesized
eect on
evaluation of
ABCb
A,C
A,B,C,I
A,C,H
Individual received ABC training
Technological factors
Complexity for users
Compatibility with existing systems
Relative improvements over existing
system (accuracy and timeliness)
Relevance to managers' decisions and
compatibility with rm strategy
A,C,E,F
A
A,E
Literature
sources(s)a
Individual characteristics
Disposed to change
Production process knowledge
Role involvement
Candidate variables
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
ABC project
management
Individual
factors
Organizational
factors
Process factors
Contextual factors
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Team
processc
Team
Team
Team
Team
RESOURCES
N/A
IMPCOST
Team
N/A
INFOQUAL
MSUPPORT,
MINVOLVE,
USUPPORT
C1 vs C2
REWARD
Team
C1 vs C2
C1 vs C2
C1 vs C2
C1 vs C2
C1 vs C2
CHANGE
interviews
COMMIT,
VALUES, AND
M vs D
M vs D
Research
design or
variable
mappingd
Table 1
Candidate variables for analysis of determinants of evaluations of ABC implementation: contextual factors and process factors identied in the research literature
528
A,C,D,H,I
A,C,H
A,C,D,F,I,
A,B,
+,0
+,+,+,+,0
+,+,+
,,+,+,+
X
X
X
X
LAYOFF
NOGROW
LABOR
IMPPLT
C1 vs C2 and
Team
TURB
COMPETE
a
Source legend: A: Anderson (1995). Anderson constructs a list of factors previously implicated in ABC implementation outcomes from the research literature and
from practitioner accounts of implementations and provides evidence on how these factors inuence one rm's adoption of ABC. Recent empirical research: B: Shields
(1995); C: Innes and Mitchell (1995); D: Gosselin (1997); E: Foster and Swenson (1997); F: Malmi (1997); G: McGowan and Klammer (1997); H: Krumwiede (1998); I:
Chenhall and Langeld-Smith (1998)
b
Foster and Swenson (1997), McGowan and Klammer (1997) and Malmi (1997) study specic ABC implementation sites rather than rm-level implementation.
Anderson (1995), Krumwiede (1998) and Gosselin (1997) distinguish correlates of dierent stages of implementation. Because we study plants that implemented ABC
after the formal corporate adoption of ABC, we focus on factors that stage-specic studies nd to inuence the `àdoption'' and `àdaptation'' stages. For studies that do
not distinguish stage-specic eects or that employ multiple measures of ABC project outcomes, we report the sign of the correlation between of the variable and overall
evaluations of the ABC project.
c
Variables associated with intrateam processes of the ABC design team (e.g. group cohesion, team leadership) are not examined in this study.
d
Variable treatment legend: C1 vs C2 indicates a variable that diers between but not within companies. M vs D indicates a variable that diers between managers and
ABC developers but not within each group. The designation N/A indicates that the variable is not examined in this study because there is neither within rm nor between
rm variation (e.g. all sites use a common software package and no site integrated ABC with other information systems prior to the end of the study). Team indicates a
variable that reects intrateam processes of the ABC development team. The eects of intrateam processes on ABC system evaluations are not considered in this paper
(see Anderson et al., 1999). Words in UPPER CASE are variable names of factors that are examined in this paper. `Ìnterviews'' designates an association that is examined
in this paper using interview data but not survey data.
External environment
Heterogeneity of demands
Competition
Environmental uncertainity
Likelihood of layos
Growth opportunities
Labor relations
Importance of site to company
External communications/external
experts
529
530
consistent. Although some studies fail to document a statistically signicant eect (denoted ``0''),
in only one case (environmental uncertainty) do
studies nd signicant but conicting eects. In
this case, Innes and Mitchell (1995) investigate
uncertainty associated with the likelihood of ABC
data threatening respondents' employment (e.g.
cost reduction through layos), while other studies
focus on the potential for ABC data mitigating
informational uncertainties and promoting better
decision-making. Thus, this is a case of dierent
denitions of uncertainty rather than substantive
disagreement between the studies' results. In summary, there is widespread agreement in the academic literature on broad correlates of ABC
implementation eectiveness. Sources of instability
in the relation are less well understood. These
observations are the departure point for this study,
which tests a structural framework among correlates of ABC system eectiveness and examines the
stability of the structural model.
2.2. The proposed structural framework
Although the empirical literature has progressed
from case studies and anecdotes to systematic
evidence on correlates of ABC project outcomes,
there is little correspondence between empirical

studies and studies that propose process theories
of ABC implementation (Anderson, 1995; Argyris
& Kaplan, 1994; Kaplan, 1990; Shields &
Young,1989). Process theories hypothesize that
project outcomes depend critically on the implementation process and on contextual factors related
to the external environment. Process theories of
ABC implementation are similar to Rogers' (1962,
1983) model of organizational change and innovation. In Rogers' model, managers' consideration of
an innovation is motivated or constrained by circumstances in the rm's external and internal environment and by characteristics of the individual
evaluating the innovation what we refer to collectively as contextual factors. Subsequent evaluations of the innovation are inuenced by
comparison between the innovation, the status quo,
and alternative innovations, and by factors related
to the innovation experience what we term process factors. Contextual factors inuence the process
of implementation and the evaluation of the resulting ABC system. Process factors only inuence evaluations of the ABC system. This ``structure'' that
process theories hypothesize is depicted by arrows
that connect the boxes in Fig. 1 (ignore for now
relations among process factors).
Fig.1. Structural model of ABC implementation.
Process theories distinguish from the list of correlates in Table 1 those that relate to the context in
which the evaluation of ABC is conducted
including factors related to organizational context
and factors related to the individual asked to render an evaluation and those that relate to the
process of implementing ABC. This distinction is
reected in columns 47 of Table 1. The categories
are not perfectly separablefor example, organizational norms with respect to functional specialization may be mirrored in how the ABC project is
managed (e.g. as an accounting project or as a
multi-disciplinary project). Nonetheless, the
separation is reasonably straightforward. Contextual factors include those related to the organization (column 4) and those related to the
individual asked to evaluate the ABC system (column 5). Implementation process factors are also
divided into two types: those that reect interactions between the ABC project team and the
organization (column 6), and those that reect the
internal functioning of the ABC project team
(column 7, e.g. communications and goal clarity
among team members). The organizational literature discusses the relation between project outcomes
and internal team processes (e.g. Bettenhausen,
1991; Cohen, 1993; Cohen & Bailey, 1997). However, because these research questions are not closely related to the accounting literature that we
extend, are motivated by dierent organizational
theories and demand a dierent unit of analysis,
we consider the variables in column 7 outside the
scope of this paper.3 We focus instead on the
structure and stability of relationships between the
variables in columns 46 and evaluations of ABC
systems.
2.3. Research questions
Two sets of related research questions are considered. The rst research questions are related to the
objective of testing the descriptive validity of process
theories of ABC implementation. Specically, we
investigate whether there are associations between:
3
We investigate questions related to intrateam processes of
designing and maintaining ABC systems in a second paper
from this study (Anderson, Hesford & Young, 1999).
531
1.1 evaluations of ABC systems and contextual

variables that represent individual and
organizational circumstances;
1.2 evaluations of ABC systems and the implementation process; and,
1.3 the ABC implementation process and contextual variables that represent individual
and organizational circumstances.
These research questions are depicted in Fig. 1
as arrows between three groups of variables: contextual and process factors and implementation
outcomes. Questions 1.1 and 1.2 have been considered in previous empirical research on correlates of ABC implementation eectiveness.
Question 1.3, which links process theories of ABC
implementation and theories of organization
change to the existing empirical literature, is a
unique contribution of this study.
A second set of research questions is motivated
by the earlier observation that the third column of
Table 1 can not be constructed without assuming
very strong forms of model stability. We explore
the validity of these assumptions in two ways.
First, we use eld research to explore criteria that
our respondents employ in evaluating ABC systems. We then investigate how the model of ABC
evaluation is aected by the evaluation criterion.
Second, our research design and sample selection
permits us to test for forms of model stability
suggested by previous studies. Thus, we explore:
2.1 what criteria are used by managers and
ABC system developers to evaluate ABC
implementation eectiveness;
2.2 do the associations examined in research
questions 1.11.3 dier for dierent evaluation criteria; and,
2.3 are the associations examined in research
questions 1.11.3 stable across rms, across
respondents with diering involvement in
the ABC project, and across sites with ABC
systems that are of dierent maturity?
In summary, this paper attempts to link empirical
studies of correlates of ABC implementation with
process theories of ABC implementation (questions
1.11.3) and provides evidence on model stability
across a number of dimensions (questions 2.12.3).
532
3. Research design
The research design is dened by three choices:
selection of rms and specic ABC implementation
projects for study and selection of qualied respondents for each project. Evaluating process models of
ABC implementation necessitates an understanding
of the rm's approach to implementing ABC and
access to several ABC implementation projects at
each rm. A research design that employs eldbased research oers this level of understanding and
access; however, costs of eld research and the time
to develop relationships with corporate partners
limit the sample size. We study two automobile
manufacturing rms, both with mature corporate
ABC programs and many ABC implementation
sites. In the sections that follow, we discuss the
rms' programs for implementing ABC and our
approach for selecting sites for study.
3.1. ABC implementation in two automobile
manufacturers
The US auto industry is an appropriate setting
for studying the applicability of models of organizational change to ABC implementation because
rm-wide implementation demands developing
ABC models for many of remote locations and
because in 1995 ABC was a mature technology for
two of the rms. Previous research that examines
ABC adoption by the rm nds that large organizations with hierarchical structures, centralized
decision-making and signicant job standardization are more likely to adopt ABC (Gosselin,
1997). Moreover, ABC is attractive to rms in
competitive environments that demand continuous cost reduction (Chenhall & LangeldSmith, 1998), particularly when existing cost systems fail to support decisions related to cost
reduction. In the early 1980s, the then ``Big 3'' US
auto manufacturers t this characterization. Consequently, it is not surprising that when ABC
became visible in the practitioner literature (e.g.
Cooper, 1988), at least two rms began experimenting with it and adopted it by 1991. Anderson
(1995) investigates the correspondence of a model
of innovation with one company's eight year
experience of moving from ``problem awareness'', to
experimentation and evaluation of alternative cost

systems, and nally, to adoption of ABC.4 This
paper continues the exploration, adding a second
rm that adopted ABC shortly after the rst rm,
and shifting the unit of analysis to individuals
involved in 21 ABC implementation projects.
After the rms adopted ABC as a corporate
initiative, corporate ABC groups were charged with
supporting implementation at all manufacturing
sites. Nonmanufacturing sites were to follow, as the
corporate group gained implementation expertise.
The process of implementing ABC at a site diers
somewhat between the two companies. Although
both companies espouse a theory of activity based
management in which process or activity costs
are as important as product costs Company 2 has
made this more central to the objective of ABC
implementation than has Company 1. Neither company used ABC in budgeting or performance evaluation at the time of our study, although both were
experimenting with these possibilities. Company 2
used an outside consulting rm to oversee site-level
ABC implementation projects and augmented site
teams with corporate ABC group members. Company 1 relied solely on employees at the site,
although divisional liaisons were available to assist
the team. Assistance most often took the form of
computer software technical support.
In spite of these dierences, there are striking
similarities in the rms' approach to ABC implementation. Both rms had a corporate mandate to
implement ABC that allowed plants to implement
ABC within a three to ve year window of local
management's choosing. Both rms used what
Lindquist and Mauriel (1989) term a ``depth
strategy'' of implementing ABC fully in a few sites
and adding sites over time, rather than a ``breadth
strategy'' of simultaneously implementing a more
limited version of ABC across all sites. Neither
rm used ABC data for inventory valuation or in
performance evaluations of managers (e.g. calculating ABC-based cost variances) at the close of
our study. Indeed both rms were advised by their
(dierent) external auditors to delay using ABC
4
Anderson (1995) uses the rm as the unit of observation
and limits consideration of specic ABC projects to prototype
projects that were critical to the rm-level adoption decision.
for inventory valuation until all sites installed ABC

systems. Both rms standardized development and
maintenance of ABC models over time and used the
same PC-based software. Both rms managed ABC
implementation from a corporate group that reports
through the nance function, but attempted to gain
support from the operations function. Both rms
asked that the local ABC team be ``multi-disciplinary''; however, most teams included at least
one accountant or budget analyst and the team
always reported to the plant controller. Finally,
both rms introduce the ABC project with an
executive awareness session for functional managers
at the site, training for ABC developers, and subsequent management reviews of project milestones.
3.2. Selection of ABC implementation sites and
critical informants
Anderson (1995) observed that, after the rm's
decision to adopt ABC, continued corporate support of the ABC initiative did not depend upon
success of specic ABC projects. Rather, following
a period of controlled experimentation when project success was critical, the corporate initiative
acquired a life of its own. This pattern is consistent with research on innovation adoption and
illustrates a critical distinction between individual
and organizational adoption of innovations:
Because organizations are complex hierarchical
systems, contradictory part-whole relations are
often produced when system-wide innovations
are introduced. An organization-wide innovation of change developed by one organizational
unit often represents an externally imposed
mandate to adopt the innovation to other,
often lower-level, organizational units. Thus . . .
top management . . . may express euphoria
about the innovation it developed for the entire
organization, while frustrations and oppositions to that same innovation are expressed by
the aected organizational units (Van de Ven,
1993, p. 285).
Studies of ABC implementation that rely on a
single senior manager's evaluation of a rm's ABC
system may reect an average assessment of
533
widely diering project outcomes or biases of top

management. To address these concerns, we
gather data from several ABC projects within each
rm and use local informants for each project.
ABC sites are selected using three criteria. First,
we select sites that initiated ABC development after
the corporate decision to implement ABC but during dierent periods of the rm's ABC implementation history. We exclude experimental or prototype
projects to avoid confounding routine implementations with those that were linked to the organizational decision to adopt ABC.5 Inclusion of projects
from dierent periods permits investigation of temporal inuences on ABC system evaluations.
A second factor in site selection is an attempt to
include all auto manufacturing production processes. Approximately half of the sites from each
rm produce components that are unlikely to be
outsourced (termed ``core'' components), including:
major metal stampings, foundry castings, engines,
and transmissions. The remaining sites produce
peripheral components and face external competition. Selecting core and peripheral components sites
maximizes variation in the external environment
factors of Table 1 (subject to the limitation that the
study occurs within a single industry), allowing
investigation of the relation between these contextual factors and ABC system evaluations. In
addition to traditional manufacturing sites, the service parts distribution groups of both rms are
included. We were unable to match a contiguous
stamping and assembly plant that was included for
one rm; thus, the sample includes eleven sites from
one rm and ten sites from the other rm.
A nal factor in selecting sites is the perceived
success of the ABC project. We wish to study sites
that represent the full range of implementation
outcomes. One rm adopted ABC in 1991 and
consequently had fewer ABC projects from which
to choose. Meeting the rst two criteria for site
selection virtually exhausted the population of
ABC sites; thus, it is unlikely that we were directed
toward exceptional projects. The second rm
adopted ABC in 1989 and had over 150 ABC
models at the inception of our study. To guard
5
Anderson (1995) provides evidence of the highly charged
political environment of prototype projects.
534
against the rm directing us to relatively successful

projects, we examined an independent assessment
of ABC project success. In a related study we
conducted a survey of eight division-level ABC
managers; assessments of 50 ABC implementation
projects. Seven of the proposed sites were covered
by the survey. Responses to questions related to
ABC project outcomes indicate that the seven sites
span the full range of evaluations.
Selection of qualied informants about local ABC
implementation projects is guided by the literature
on organizational change and evidence on ``respondent eects'' in ABC system evaluation. McGowan
and Klammer's (1997) nding that managers
charged with using the ABC system hold dierent
opinions about the system compared to those who
develop the ABC data suggests two groups of
respondents. The organizational literature goes further, arguing that organizational change is a process
of changing the beliefs and behaviors of individuals
(Marcus & Weber, 1989). Although key individuals
may play a disproportionate role in convincing others to adopt an innovation, it is rare that a single
individual can unilaterally adopt innovations on
behalf of an organization. Moreover, the beliefs and
behaviors of individuals toward a particular innovation are shaped by their unique, individual circumstances within the organization.6 We attempt to
obtain full participation from two populations of
critical informants: ABC system developers and the
site's management team (e.g. the plant manager and
functional managers who report to the plant manager), and measure `ìndividual characteristics''
(Table 1) that are hypothesized to inuence these
respondents evaluations of ABC7
3.3. Data collection

Each research site was visited for two days
between March and November of 1995. Surveys
were mailed to the site one week before the visit
and respondents brought the completed survey to
the interview, or, if they were not available for an
interview, mailed it to the researchers. Similar
surveys were administered to ABC developers and
managers. Survey questions about individual
motivation, organizational circumstances and the
ABC project were developed from established
scales in the organizational and information systems literatures (e.g. Davis, 1989; Davis, Bagozzi
& Warshaw, 1989; Jaworski & Young, 1992;
McLennan, 1989; Robinson, Shaver & Wrightsman, 1991; Seashore, Lawler, Mirvis & Cammann,
1983; Van de Ven & Ferry, 1980). At times wording
changes were necessary to t the organizational
context and the specics of ABC system development. Questions dealing with the implementation
process were based on information gathered in the
rm-level study of ABC implementation and, where
applicable, by using question structures that are
similar to related scales (e.g. for involvement in system design, scales for ``task involvement'' were
used). A survey pre-test administered to ten corporate and divisional ABC employees at each rm, all
with experience implementing ABC, was used to
revise the survey questions. We received 265 surveys
176 management surveys and 89 ABC developer
surveys (Table 2).8
The proles of the respondents do not dier
visibly between rms. Company 2 uses slightly less
experienced people as ABC system developers
See Pedhazur and Schmelkin (1991) for a discussion of

respondent eects associated with factors such as age, gender,
and educational attainment, as well as a variety of personality
traits. Weick (1995) describes individual processes of interpreting, or ``making sense'' of the environment.
7
Although some have argued that eective use of ABC
requires involvement of employees at the lowest level of the
organization, the rms of this study have not disseminated
ABC data to this audience. Thus we have no basis for investigating the associations between workers' attitudes and ABC
system outcomes and were discouraged from doing so by both
rms. Production workers are occasionally included in the survey population as ABC system developers when they served on
development teams.
8
To our knowledge 15 people (all managers) who were targeted to complete a survey failed to do so. Of these, twelve were
managers who claimed to be unfamiliar with ABC either by
virtue of recently joining the plant or because their job responsibilities did not cause them to use the system (e.g. ve were
Personnel department managers). Three plant managers who
appeared qualied to complete the survey refused to do so
because of the time involved; however, even these managers
agreed to be interviewed and the interviews suggested that this
group included both advocates and opponents of the ABC
approach. The non-respondents were scattered across thirteen
of the 21 sites. In sum, we do not believe that this aspect of
non-response has induced signicant bias in the data.
535
Table 2
Distribution of survey respondents by site and company
Plant processes
Total
Number of respondents
ABC developers
Number of respondents
Plant management
Company 1
Company 2
Company 1
Company 2
Core manufacturing
Major stampings
Contiguous stamping and assembly
Foundry
Engine manufacture
Engine manufacture
Transmission assembly
22
14
28
31
24
40
3
0
4
5
2
7
2
4
2
9
5
5
10
0
10
9
10
15
7
10
12
8
7
13
Secondary manufacturing
Parts assembly
Parts machining and assembly
Parts machining and assembly
Electronics assembly
19
19
18
27
3
4
2
6
2
4
3
2
7
5
8
12
7
6
5
7
Other: service parts distribution
23
10
Total
265
46
43
91
85
than does Company 1 evidenced by fewer years

on average with the company and in the department from which they joined the ABC project.
There are no dierences between the rms in educational attainment or ABC training developers
typically receive 30 hours of training in ABC and
managers typically receive no ABC training.
Managers have longer tenure with the rms than
do ABC developers; however, by virtue of promotions and company transfers, tenure at the site
is not appreciably dierent between managers and
ABC developers.
Interviews were conducted with 236 of the 265
survey respondents. Although most interviewees
returned their surveys at the start of the interview,
they did not provide their names in the body of
the survey and specic survey responses were not
discussed during the interview. Interviews followed a loose structure aimed at supplementing
the survey data. On average 10 interviews were
conducted at each plant, ranging in duration from
approximately 30 minutes, for functional managers with little awareness of the ABC project, to 4
hours for system developers with years of system
design and maintenance experience. With two
exceptions, all interviews were taped and transcribed
for content analysis.
4. Measurement of variables and process structure

4.1. Contextual variables
A limitation of having only two rms is that
`òrganizational factors'' that reect rm characteristics (e.g. centralization, functional specialization)
are confounded (e.g. Table 1, column 8, ``C1 vs
C2''). We investigate the stability of our model
across rms; however, the research design does
not permit us to distinguish among alternative
explanations for rm eects. Studies that use a
large number of rms, each providing data on
several implementation sites are needed to investigate the eect of rm characteristics on implementation project outcomes. This study focuses on
organizational factors that are more ``local'' as
a result of dierent products, processes and people
at the sites.
To explore research question 1.1, we examine
the signicance of direct associations between
twelve contextual factors (Table 1, column 8).
Three variables hypothesized to inuence individuals' evaluations of ABC are considered: (1) the
extent to which the individual believes that change
is warranted (CHANGE) what the organizational psychology literature terms ``felt need for
536
change''; (2) individual commitment to the organization (COMMIT); and (3) the extent to which
the individual identies with the values of the
organization (VALUES). Of the four variables
identied as individual contextual factors in Table
1, two are captured in these measures. A third
factor, ABC training received, was measured;
however, because most managers receive no training and most developers receive 3040 hours of
training, this ``variable'' is confounded with other
factors that dier between managers and ABC
developers (e.g. role involvement in the ABC system). A fourth factor the individual's knowledge of production processes and job experience,
was explored in interviews only.
Eight organizational contextual factors are
hypothesized to inuence evaluations of the ABC
system and management involvement in the
implementation process: (1) the extent to which
individual performance is linked to rewards
(REWARD)9 (2) the competitive environment
(COMPETE); (3) the quality of existing information systems (INFOQUAL); (4) environmental
turbulence (TURB); (5) the likelihood of employee
layos (LAYOFF); (6) impediments to plant
growth (NOGROW); (7) the perceived importance
of the plant to the company (IMPPLT); and (8)
the perceived importance of cost reduction to the
plant (IMPCOST). Advocates of ABC claim that
new cost data are most valuable when competition
or limited growth prospects cause rms to focus
on cost reduction. COMPETE, NOGROW and
IMPCOST measure these motivations for adopting ABC. Cost reduction eorts often produce
reductions in employment (Innes and Mitchell,
1995). In a unionized environment with contractual employment guarantees, managers are
often reluctant or unable to reduce employee
headcount. As a result, many of the prospective
benets of ABC systems may be unrealizable. A
measure of the likelihood of layos (LAYOFF) is
9
It is important to note that REWARD does not measure
the extent to which individuals believe that they will be rewarded if they implement ABC or use ABC data. Rather,
REWARD measures general reward expectancy, because management control practices and incentives were not changed to
promote ABC use in any of the sites.
used to capture this potential deterrent to ABC

implementation. In the same vein, the quality of
historical managementlabor relations (LABOR)
is a ninth contextual factor that is hypothesized to
inuence the degree to which the local union supports the ABC implementation project (but not
managers' evaluations of the ABC system). Even
in rms that face heightened competition, some
operations are less threatened than others. Selection of core and peripheral component plants
maximizes the observed range of competition
within each rm. The perceived importance of the
site (IMPPLT) to the rm is included as a potential mitigating factor to external competition.
Organizational theorists argue that there are limits
to the amount of change that an organization can
absorb. Site-specic turbulence (TURB) is a measure of concomitant changes that compete with
ABC for management attention. Finally, within a
rm, sites often have diverse ``legacy'' information
systems that are more or less eective in meeting
managers' information needs. Adoption of new
information technology such as ABC systems
depends upon t with and incremental improvement upon existing systems (Kwon & Zmud,
1987). A measure of respondents' beliefs about the
quality of existing information systems (INFOQUAL) is used to examine how the current information
environment
inuences
managers'
commitment to or evaluation of the ABC system.
4.2. Process variables related to ABC
implementation
Appropriate process variables for analysis and
the relation between process variables depend
upon rm-specic ABC implementation strategies.
Previous studies that consider the relation between
process variables and ABC project outcomes test
for correlation between a wide range of possible
process variables without knowledge ex ante of
rms' implementation processes. As a result, tests
that pool rms with dierent implementation
strategies can not distinguish between relevant
process factors that are not statistically correlated
with ABC outcomes and irrelevant process factors. The ABC implementation process variables
that we consider are those identied in Table 1,
column 6. The hypothesized structure between the

process variables (Fig. 1) was developed prior to
data collection based on interviews at the corporate
level and is described below.
The general structure of the rms' ABC implementation process is depicted inside of the box
labeled `ÀBC Implementation Process Factors'' in
Fig. 1. Specically, rm-level managers committed
the company to ABC implementation prior to the
ABC project at the research sites. Respondents'
opinions about the strength of this commitment
are measured by the variable, MSUPPORT. The
management awareness sessions that each rm
used to introduce ABC to local managers was
intended to increase managers' knowledge of ABC
and to secure their involvement in the project.
Respondents' beliefs about whether local commitment was achieved are measured by the variable,
MINVOLVE. The proposed relation between
MSUPPORT and MINVOLVE reects the direction of inuence described above. Both rms
assigned responsibility for implementing ABC to
local management. Although corporate resources
were available to augment or support the team,
team members were selected and freed from other
responsibilities (or not) by local managers. Local
managers were also given discretion in the decision to involve local union leaders in the project.
The adequacy of resources committed to the ABC
project is measured with the variable, RESOURCES. The degree to which the union was aware of
and involved in the ABC project is measured by
the variable, USUPPORT. The proposed relation
between MINVOLVE and both RESOURCES
and USUPPORT reects the gatekeeper role that
local managers are assigned. The proposed relation between MSUPPORT and USUPPORT
reects a possible ow of inuence from top managers of the rm, to the local union. Although top
managers did not intervene directly in local union
aairs, at least one rm noted that the rm's
decision to implement ABC had become a negotiating point with labor at the national level.
The proposed relation between MSUPPORT
and RESOURCES reects the support that the
corporate ABC group provided development
teams after local management initiated an ABC
project.
537
The relationships described above reect rmspecic implementation processes that have been
ignored in previous research. However, nding
that these relations hold is simply evidence of face
validity of the data rather than evidence on the
proposed research questions. To explore research
question 1.2 we examine the eects of each process
variable on evaluations of the ABC system.
Because implementing ABC is a local management
decision, we explore research question 1.3 by
examining the association between contextual factors and local managers' involvement in the ABC
project (MINVOLVE).
4.3. Evaluation measures of the ABC system
As in previous studies we employ an overall
evaluation of the ABC system (OVERALL) that
allows respondents to self-dene the evaluation
criteria. However, as research question 2.1 indicates, this raises the question: ``What criteria are
embedded in overall assessments of ABC systems?'' Content analysis of 236 taped interviews is
used to explore this question.10 Full text transcripts of the 236 interviews were searched for key
words related to ABC system evaluations. Search
results yielded 129 respondents'' opinions.11 The
129 respondents represent 20 of the 21 sites and
are split in approximately the same proportion as
the survey respondents (Table 2) between the rms
and between ABC developers and managers. After
identifying discussions of ABC system evaluation,
the transcripts were read by a researcher and a
research assistant. Three evaluation criteria
emerged: (1) use of ABC data for cost reduction;
(2) use of ABC data for process improvements;
and, (3) improved accuracy of product cost information relative to the traditional cost system. The
10
An analysis software package designed for non-numerical,

unstructured data (NU.DIST1) was used. The researcher codes
interview passages related to constructs of interest and attributes of the interviewee. The software uses these codes to create
a structured index that is useful for investigating systematic
response patterns.
11
Some interviewees did not believe that they had sucient
knowledge about ABC systems to oer an opinion about system eectiveness, while others were not asked to discuss the
issue.
538
researcher and research assistant independently

coded the responses as belonging primarily to one
of the three categories. The codes were compared
and dierences were discussed and resolved.
Although respondents occasionally combined the
rst and second criteria in their discussion, very
few respondents discussed the third criterion in
conjunction with either of the others. Consequently, we combine the rst and second groups
to form two groups who dier in the way that they
dene an eective ABC system. In the rst group
are 67 respondents who dene eectiveness as use
of ABC data in cost reduction or process improvements. In the second group are 47 respondents who
believe that increased cost accuracy denes an
eective ABC system.12
Contingency tables are used to evaluate the
association between opinions about evaluation
criteria and: the respondents' company; whether
the respondent worked in a plant that faced signicant external competition; whether the respondent was an ABC system developer; whether the
respondent claimed to have received training in
ABC; and the respondent's job title. Small sample
sizes cause some contingency tables to have
observed and expected counts that violate asymptotic assumptions for normal chi-square estimations. Consequently, we use exact test procedures
that do not impose distributional assumptions.
Comparing dierences between respondents who
evaluated ABC system eectiveness based on use
in cost reduction or process improvement with
those who base their opinion on improved accuracy of cost data, respondents' job title is the only
signicant (p <0.01) determinant of which view is
held. The same result is obtained in a multivariate
analysis. When a logit model is estimated for the
probability of holding the `àccuracy'' view, the
respondent's job title is the only signicant explanatory variable.13 Respondents with jobs that are
linked to production (e.g. engineering, materials
12
Ten respondents (7.8%) oered opinions that were suciently unusual that they were discarded. Five respondents
oered valid but very dierent responses and thus are not
included in subsequent analysis.
13
The logit model correctly classies 73% of the respondents, an improvement over the nave model which correctly
classies 58% of the respondents.
management, production operations, quality control) are signicantly more likely to evaluate the
ABC system based on whether it provides more
accurate costs than are respondents in administrative roles (e.g. plant manager, nance and
accounting, information systems, human resource
management). Dierences in opinions are unrelated to the respondent's rm, whether the
respondent works in a site that faces competition,
whether the respondent is a system developer or
whether the respondent received ABC training.
The content analysis is consistent with evidence
(Cooper et al., 1992) that rms typically adopt
ABC with one of two objectives: increased product cost accuracy (e.g. for inventory valuation) or
use in process improvement (e.g. activity based
management). Cooper et al. hypothesize that different ABC project objectives require dierent
implementation processes. Foster and Swenson
(1997) nd that dierent evaluation measures are
correlated with dierent implementation process
variables. We explore these issues (research question 2.2), by substituting for the OVERALL measure of success in Fig. 1, measures of ABC data
accuracy (ACCURACY) and use (USE) developed
from the survey data. Simultaneous estimation of
both aspects of ABC system eectiveness allow us
to provide evidence on whether the two objectives
are compatible or are mutually exclusive outcomes.
4.4. Descriptive statistics
Responses to 61 survey questions are used as
indicators of 16 latent contextual (12) and implementation process (4) variables and of measures of
ABC implementation eectiveness (3). Table 3
provides the full text of the survey questions
developed for each latent variable, as well as
summary descriptive statistics and Cronbach's
(1951) measure of construct validity. Responses to
58 of the survey items generated responses that
spanned the ve point Likert-type scale. With two
exceptions the constructs are adequately identied, with Cronbach's alpha exceeding the 0.6 level
used in exploratory research. Item-level response
rates from the 265 respondents ranges from 190 to
265. There are typically two reasons for nonresponse: (1) inadequate knowledge for forming
Table 3
Summary statistics for manifest variables and latent constructsa
Latent construct
2
3
4
5
ACCURACY: perceived accuracy of ABC data
1 (R)
2
3
USE: perceived use of ABC data
1
2 (R)
3 (R)
4
ABC implementation process variables
MSUPPORT: top management support
1
2
3
Item
N
Item
Mean
Std.
Dev.
Despite the implementation challenges, I am convinced that ABC is the

right tool for helping us manage costs in this company
Overall, the benets of ABC data outweigh the costs of installing a new
system
Supporting ABC is the right thing to do in this company
If I were asked to decide whether this company should continue
implementing ABC, I would vote to continue
In general ABC is a good thing for this company
245
3.8
0.75
220
3.6
0.87
240
240
3.9
3.9
0.79
0.92
244
4.0
0.70
The ABC costs do not seem reasonable to me based on what I know about
this plant
The results from the ABC model matched my intuition about costs of
production
Data from the ABC model provides an accurate assessment of costs in
this plant
223
3.8
0.81
233
3.6
0.77
240
3.7
0.72
Information from the ABC model has had a noticeable positive impact
on this plant
I am reluctant to use ABC data in place of costs from the traditional
cost system
The ABC model has not been used and has been `gathering dust' since it
was completed
Data from the ABC model are used for special costs studies
228
2.9
0.83
232
3.4
0.96
233
3.5
0.97
229
3.2
1.0
252
3.4
1.1
254
3.2
1.0
250
2.9
1.0
243
238
3.4
3.1
0.80
1.0
This company's top managers have provided visible support for the ABC
initiative
Support for implementing ABC in this company comes from both the
manufacturing operations and nance groups
Support for implementing ABC in this company is widespread
MINVOLVE: local management knowledge of and involvement in ABC

1
The managers of this plant are knowledgeable about the theory of ABC
2
Most managers of this plant are capable of using ABC data to reduce costs
Cronbach's
std. alpha
0.93
0.65
0.70
0.77
Measures of ABC implementation success

OVERALL: overall value of ABC
1
Survey items
(R=reverse coded item) 5=strongly agree, 1=strongly disagree
0.72
539
(continued on next page)
The working environment at this plant changes constantly

Manufacturing processes at this plant change all the time
New management programs are introduced all the time in this plant
The threat of layos or cutbacks to hourly workers is low
This plant has had major cutbacks and layos in recent years
Getting authorization to hire new employees for this plant is dicult
LAYOFF: history of employee layos

1 (R)
2
NOGROW: impediments to plant growth

1
Most of the data required for a good ABC model are readily available
in this plant
The plant's information systems generally provide data that are
accurate and up to date
The information systems of this plant contain many data errors
Future demand for the products that this plant produces is uncertain
Competitive pressures could cause this plant to close
This plant has had a lot of management turnover in recent years
This plant faces competition from other plants in this company for business
This plant faces sti competition from outside companies for business
TURB: environmental turbulence

1
2
3
3 (R)
INFOQUAL: quality of other information systems

1
Contextual variables
COMPETE: competitive environment
1
2
3
4
5
RESOURCES: adequacy of resources for the ABC development project

1
The people who developed the ABC model had the equipment and
materials needed to do their job
2
The people who developed the ABC model had access to the people
from whom they needed to get information
3
The ABC development project was adequately staed to insure
completion of the task in the time allotted
USUPPORT: union support

1
2
The local union is receptive to the concept of ABC
The local union was involved in decisions that aected the ABC model
Most managers of the plant were involved in determining how thei

departmental expenses were allocated to activities and products
When the developers of the ABC model met with local managers,
they received suggestions from the managers
Survey items
(R=reverse coded item) 5=strongly agree, 1=strongly disagree
Latent construct
Table 3 (continued)
3.3
210
263
264
264
264
261
265
238
246
222
4.0
2.4
2.3
2.9
3.0
3.5
2.8
3.0
3.0
2.6
3.3
3.3
3.3
3.8
4.0
224
264
264
263
241
264
3.9
2.9
2.6.
3.4
3.5
Item
Mean
214
190
192
205
228
Item
N
0.93
0.99
1.1
0.88
0.96
0.82
1.0
1.0
1.1
1.0
1.0
0.98
1.2
0.97
0.90
0.60
0.63
0.87
0.99
0.91
1.0
Std.
Dev.
0.71
0.70
0.61
0.76
0.54
0.63
0.77
Cronbach's
std. alpha
540
I
I
I
I
My values and the values of this company are quite similar
My values and the values at this plant are quite similar
COMMIT: commitment to the organization

1
2 (R)
3
4 (R)
VALUES: shared organizational values

1
2
In this plant, high quality work increases my chances for a raise,

a bonus, or a promotion
In this plant, nancial rewards are tied directly to performance
The ability to reduce costs is rewarded in this plant
In this plant, high performance is recognized and reward
264
264
263
264
264
263
264
264
264
265
3.1
3.3
3.3
3.6
3.7
3.6
4.3
4.2
4.2
4.1
3.8
4.2
3.6
4.3
3.0
4.2
4.0
4.0
4.4
2.9
2.4
3.2
3.6
1.0
0.95
0.92
1.0
0.69
0.82
0.65
1.0
0.77
1.1
0.85
0.73
0.71
0.53
0.94
0.82
1.0
0.87
0.70
1.1
0.92
0.98
1.1
0.84
0.75
0.73
0.58
0.40
0.78
0.87
a
This table provides the text of the survey items and descriptive statistics for each of the items that comprise the latent constructs used in subsequent analysis. Item
response indicates the number of respondents that completed the question out of a possible sample of 265 respondents. Descriptive statistics and scale reliability (Cronbach's alpha) are reported for the reduced sub-sample of 112 respondents who completed all questions (e.g. with listwise deletion of missing observations).
2
3
4
REWARD: reward expectancy

1
Changes in the way we work in this plant are needed

There is no need for this plant to change the way it does things
I would like to see changes in plant policies and procedures
CHANGE: felt need for change

1
2 (R)
3
am proud to work for this company
feel very little loyalty to this company
am proud to work for this plant
feel very little loyalty to this plant
264
264
263
This plant's cost reduction eorts are important to the company

Cost reduction is the most important objective in this plant
Cost reduction is not a major concern in this plant
265
265
264
262
241
264
261
261
262
263
3
IMPCOST: importance of cost reduction to plant
1
2
3 (R)
At this plant the union and management have similar goals

Relations between labor and management need to be improved at this plant
Labor and management in this plant work well together
We have diculty getting authorization to hire replacements for

employees who retire or leave this plant
This plant is one of the most important manufacturing sites of this company
This plant produces products that have a major inuence on this company's
protability
This plant is critical for the success of this company
IMPPLT: importance of the plant to company

1
2
LABOR: quality of labor relations

1
2 (R)
3
541
542
Table 4
Analysis of company, plant and respondent eectsa
Variable
p-Value on F-statistic on
rm eects
p-Value of F-statistic on
plant eects within rms
p-Value of F-statistic on
respondent eects within
plants, within rms
Model
adjusted (R2)
OVERALL
ACCURACY
USE
MSUPPORT
MINVOLVE
USUPPORT
RESOURCES
COMPETE
INFOQUAL
TURB
LAYOFF
NOGROW
LABOR
IMPPLT
IMPCOST
CHANGE
COMMIT
VALUES
REWARD
0.000
0.016
0.000
0.000
0.000
0.844
0.016
0.001
0.017
0.263
0.124
0.407
0.000
0.423
0.637
0.101
0.693
0.005
0.559
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.002
0.000
0.000
0.000
0.000
0.018
0.000
0.223
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.043
0.000
0.000
0.000
0.000
0.000
0.000
0.887
0.000
0.000
0.000
0.000
0.67
0.45
0.33
0.49
0.39
0.65
0.20
0.10
0.46
0.21
0.49
0.48
0.48
0.53
0.00
0.27
0.38
0.67
0.52
a
For each dependent and independent variable, the p-values of F-statistics from an ANOVA model of nested rm, site and
respondent eects are reported. The estimated xed eects model treats respondents as nested within sites, which are in turn nested
within rms. The model estimated for responses to items that comprise each construct (X) is:
X intercept 1 Firm 2 SiteFirm 3 RespondentSiteFirm "

The results indicate signicant respondent eects for all but one variable. This supports the claim that evaluation of ABC systems is
signicantly related to individual perceptions and that individuals are an appropriate unit of analysis (Bryk & Raudenbush, 1992;
Goldstein, 1987; Hannan, 1991).
an assessment, and (2) apprehension about

respondent anonymity. Understandably, items
with the highest non-response are those related to
management-union relations, a politically sensitive
topic. Higher response rates for environmental
context variables, which depend on general plant
knowledge alone, compared to ABC implementation process variables, which require knowledge of
the ABC project, suggests that inadequate knowledge may also explain dierential response rates.14
14
The analysis treats as missing both items with no response
and selection of the ``Not Applicable'' response. ``Not Applicable'' was oered selectively as an option for some questions
related to ABC where we anticipated problems of inadequate
knowledge and wanted to guard against forcing a ``neutral''
response of ``3''.
Earlier we argued that individuals are the

appropriate unit of analysis for modeling the
determinants of evaluations of ABC systems
because organizational theory suggests signicant
within-site variation in perceptions of contextual
and process factors likely to inuence these
assessments. The counter argument is that surveys
completed by individuals who observe the same
ABC system should be identical and that variation
simply reects measurement error. Table 4 presents evidence on the existence of respondent
eects. Analysis of variance is used to estimate a
xed eects, hierarchical linear model with rm,
site, and respondent eects (Bryk & Raudenbush,
1992). The hierarchical model nests respondents
within sites and sites within rms. Joint F-tests on
the signicance of each eect indicates signicant

rm, plant and respondent eects for all three measures of ABC implementation eectiveness. Similarly, three of the four process variables dier
signicantly at all three levels. F-tests of union support evince plant and respondent eects, but not
rm eects. Eleven of the 12 contextual variables
show strong evidence of respondent eects. There is
signicant agreement about the importance of cost
(IMPCOST) within a site; however, the importance
of cost diers signicantly between sites of a rm.
After site eects are included, there is no dierence
between the rms in the importance attributed to
cost. The overwhelming signicance of respondent
eects for these constructs is consistent with organizational research that documents the importance
of unique, individual circumstances in shaping
individual beliefs about and behaviors toward a
particular innovation. The data support using individuals as the unit of observation and argue against
data reduction (e.g. averaging survey responses of a
site), which would be appropriate if random measurement error was the primary source of with-in
site disagreement (Goldstein, 1987; Hannan, 1991;
Seidler, 1974; Rousseau, 1985).
5. The relation between evaluations of ABC
systems and contextual and process variables
Structural equation modeling (SEM) is used to
investigate the correspondence of the data with Fig.
1. SEM is a method of assessing the correspondence
of a proposed set of associations and implied variance and covariance relationships with observed
sample variances and covariances (Bollen, 1989). A
maximum likelihood tting function is the basis for
assessing goodness of t.15 Maximum likelihood
estimates are presented for the coecients of the
15
Although the categorical data of this study fail tests of
normality, that are presumed in maximum likelihood (ML)
methods, dierences in estimated coecients between ML and
unweighted least squares (ULS) methods, which do not make
distributional assumptions are often small. This is particularly
true if skewness and kurtosis are not serious problems (Bollen,
1989). Olsson (1979) discusses the robustness of ML methods.
The results that follow are qualitatively unchanged when ULS
estimation is employed.
543
measurement model, which relates the survey items

to latent variables, and the structural model, which
relates latent variables to one another. The relation
between a latent variable, i , and a survey item that
comprises it, xj , is: xj lij i ij , where lij is the
loading, or degree of association between the latent
variable and the manifest variable, and ij is measurement error associated with the survey item. The
latent variable approach mitigates measurement
error in individual survey items and provides better
estimates of the relation between latent variables.
None of the condence intervals for correlations of
the latent variables with one another includes the
value of one; a necessary but insucient condition
for the constructs to be distinct from one another
(discriminate validity).
5.1. The relation between overall evaluations of
ABC systems and process and contextual variables
Sample size limitations preclude estimating the
full model depicted in Fig. 1 simultaneously.
Consequently, the analysis proceeds in three steps.
In the rst step the relation between contextual
variables and overall evaluation of the ABC system (OVERALL) is examined. Untabulated
results indicate that the only contextual variables
that exhibit signicant (p <0.05) direct associations with OVERALL are the reward environment
(REWARD) of the site and the quality of existing
information systems (INFOQUAL). Beliefs that
individual performance is rewarded at the site
(high reward expectancy) are positively associated
with evaluations of the ABC system. Beliefs that
existing information systems provide adequate,
accurate information are negatively associated
with evaluations of the ABC system, suggesting
that ABC adds little in environments with good
information systems. In the second step of analysis
the relation between contextual variables and local
management involvement (MINVOLVE) in the
ABC project is examined. The only contextual
variable that exhibits a signicant (p <0.05) relation with MINVOLVE is the reward environment;
high reward expectancy is positively related to local
management involvement in the ABC project.
In the nal step, the rst two steps are combined, retaining only those contextual variables
544
that are associated with evaluations of the ABC

system or local managers' involvement in the ABC
project in earlier steps (INFOQUAL and
REWARD). An additional contextual variable, the
quality of historical labor-management relations
(LABOR), is considered a potential antecedent of
union support of the ABC project.16 Table 5 presents coecient estimates of the measurement
model (Panel A) and structural equation model
(Panel B) for the relation between ABC implementation process variables, the limited set of
contextual variables and respondents' overall evaluation of the ABC system. Reported results are
based on analysis of the covariance matrix for the
survey items and a sample in which observations
with missing values are excluded (listwise deletion). Alternative treatments of missing values
(e.g. pairwise deletion or imputation of missing
values) do not alter the qualitative results. Bootstrapping methods (500 samples with replacement)
are used to generate approximate p-values for the
signicance of total eects of the contextual and
process variables on overall evaluations of the
ABC system (Stine, 1989).
The standardized estimated loadings of survey
items on latent constructs in Panel A are signicant at the p <0.01 level (two tailed test), and
are large enough (greater than 0.4) to provide
condence that they measure common latent constructs. Overall model t is excellent, as indicated
by two goodness of t measures: the comparative
t index (CFI) developed in Bentler (1989), and
the root mean square error of approximation
(RMSEA) with its 90% condence interval.17
Considering sub-model t, 56% of the variation in
respondents' overall evaluation of the ABC system
is explained by process variables. The remaining
endogenous process variables are also well
explained, suggesting that the survey data are
valid representations of the rms' implementation
process.
16
Recall from Section 4.1 that historical labor relations
(LABOR) are not hypothesized to inuence management
involvement in ABC implementation.
17
CFI ranges from 0 to 1 and values greater than 0.9 are
generally interpreted as indicating good model t (Hatcher,
1994). RMSEA values less than 0.08 indicate adequate t and
values less than 0.06 indicate very good model t.
The results indicate that three process variables

positively inuence respondents' overall evaluation of the ABC system: top management and
union support of the ABC project and the adequacy of resources devoted to the project. The
signicant associations of the reward environment
and the quality of existing information systems on
overall evaluations that were discovered in the rst
step of the analysis persist. However, when total
eects are considered, the positive indirect eect of
high quality information systems acting through
local managers' involvement in the ABC project
osets the negative direct eect on the overall evaluation of the ABC system. Also, the relation
between local management involvement and the
reward environment (step 2, above) disappears
when the direct inuence of the reward environment
on system evaluations is estimated simultaneously.
Local management involvement is positively associated with top management support and with the
quality of existing information systems. Union support of the ABC project is associated positively with
local management support and with the quality of
historical labor relations. The adequacy of resources
devoted to the ABC project appears to be inuenced
more by top management support than by local
management support of the ABC project. We might
expect this result to dier between companies, since
one company systematically assisted the sites in
stang ABC projects with consultants and corporate employees; however, as we will see later, the
result holds for both companies.
The results provide face validity of the proposed
structure of the rms' ABC implementation process. Top management support is directly associated with local management awareness of and
involvement in the ABC implementation project.
Local management plays a gatekeeper role in
assuring local union support and there is no evidence that top management intervenes in this
relation. In contrast, local managers' knowledge
of and involvement with the ABC project has little
relation to whether the development team is provided adequate resources. Whether the project is
believed to have an adequate resource endowment
is related to top management support.
Comparing previous research results (Table 1)
to the total eects of Table 5, the sign of coe-
OVERALL
MSUPPORT
0.61
0.71
0.46
RESOURCES
0.18
(1.92)*
0.07
(0.87)
R2=0.55
R2=0.56
0.30
(4.02)***
0.20
(1.68) *
0.35
(1.21)
0.34
(2.50)**
0.76
(2.58)***
0.25
(2.08)**
0.19
(1.96)**
R2=0.39
0.17
(2.00)**
0.19
(1.63)
0.86
(3.08)***
R2=0.44
0.17
(2.33)**
0.21
(1.47)
RESOURCES
0.29
(0.012)**
0.10
(0.735)
0.34
(0.016)**
0.76
(0.042)**
0.23
(0.132)
0.19
(0.042)**
0.06
(0.030)**
0.80
0.67
0.66
0.89
REWARD
CFI=0.932 RMSEA=0.054, 90% C.I.=[0.039,0.068]
Estimated eect
Predicted eect
USUPPORT
OVERALL
MINVOLVE
Total eects (approximate p-value)
0.57
0.81
0.79
INFOQUAL
0.79
0.74
0.95
LABOR
All loadings are signicant at 0.01 (two-tail) level.

The sample (N=112) includes only observations with no missing values. The results are qualitatively similar when data imputation methods are employed. Two
measures of overall model t are provided: Bentler's (1989) Comparative Fit Index (CFI) and the Root Mean Square Error of Approximation (RMSEA) with its 90
percent condence interval. Bootstrapping methods (500 samples with replacement) are used to generate approximate p-values (two-tail) for the signicance of the total
eects of contextual and procedural variables on OVERALL. The p-values are approximations because bootstrapping methods do not make distributional assumptions.
***,**,* Statistically signicant at the p<0.01, 0.05 or 0.10 (two-tail) level.
Model t statistics
LABOR
REWARD
INFOQUAL
RESOURCES
USUPPORT
MINVOLVE
Independent variables
MSUPPORT
0.72
0.88
USUPPORT
the structural model t-statistics (in parentheses)b
0.64
0.60
0.60
0.69
MINVOLVE
Estimated direct eects
1
0.90
0.91
2
0.76
0.64
3
0.88
0.68
4
0.90
5
0.86
Panel B: maximum likelihood estimates of the coecients of
Survey item
Table 5
Maximum likelihood estimation of the relation between contextual and process variables and overall ABC implementation success
Panel A: standardized coecients for the measurement modelsa
545
546
cients is consistent with previous studies; however,

many contextual variables found to be inuential
in previous studies are not inuential. Finding that
top management support and adequate project
resources are signicantly related to evaluations of
ABC systems replicates previous results (Table 1).
The distinction between the importance of top
management support (MSUPPORT) and the
seeming irrelevance of local management support
(MINVOLVE) is a new nding, as is the importance of employee-level involvement (USUPPORT). Foster and Swenson (1997) report that
line workers rarely use ABC data, and indeed, we
found no evidence that the companies in our
study disseminated ABC data to line workers.
Thus, our nding of a signicant association
between ABC system evaluations and union support may reect unique aspects of deploying ABC
in a union setting.
5.2. The association between measures of ABC
system use and accuracy and process and
contextual variables
Section 4 documents two criteria used by survey
respondents for evaluating ABC systems: perceived system accuracy (ACCURACY) and evidence of use (USE) in cost reduction eorts. This
section investigates whether dierent contextual
and process variables inuence these components
of overall ABC system evaluations. Although we
are unable to link all of the individual surveys to
interviews, the survey data are consistent with the
proposition that the measures, USE and ACCURACY, are components of OVERALL. In a simple model (results untabulated) in which USE and
ACCURACY are predicted to inuence OVERALL, the coecient estimates are signicant for
both variables.18 The estimated coecient relating
18
We estimate a covariance rather than a causal path
between ACCURACY and USE. Although some people argue
that perceived accuracy of the ABC data logically precedes use,
we nd little evidence of this inuence in the interview data.
Moreover, Weick (1995) argues that an individual's actions
often inuence their interpretations. In the context of ABC,
although beliefs about accuracy of ABC data may inuence use
of the data, it is equally likely that use of the data alters managers' beliefs about data accuracy.
ACCURACY and OVERALL is 0.40 (p <0.01),

the estimated coecient relating USE and
OVERALL is 0.47 (p <0.01), R2 0:66 for
OVERALL and model t is good (CFI=0.96,
RMSEA=0.06). Based on these results, we repeat
the rst analysis step relating contextual factors
to ABC project outcomes substituting ACCURACY and USE for OVERALL (results untabulated). Compared with the overall evaluation of
the ABC system, a larger set of contextual variables are associated with respondents' beliefs
about the use and accuracy of ABC data and
many of the new explanatory variables are individual rather than organizational factors. Contextual variables associated with at least one of the
measures
are:
the
reward
environment
(REWARD), the quality of existing information
systems (INFOQUAL), commitment of the
respondent to the organization (COMMIT), the
respondent's attitude toward change (CHANGE),
the perceived importance of the site (IMPPLT),
and the likelihood of employee layos at the site
(LAYOFF).
Table 6 repeats the analysis, substituting
ACCURACY and USE for OVERALL and
including contextual variables found to directly
inuence either variable. Panel A presents coecient estimates of the measurement model and
Panel B presents coecient estimates of the structural model relating contextual and process variables to ACCURACY and USE. An increase in
the number of estimated parameters and the associated sample size requirements preclude listwise
deletion of missing observations. Reported results
are based on imputing missing data for cases with
no more than one missing value for each latent
variable. Missing values are imputed as the average response of the respondent to other questions
that comprise the latent variable. Model t is good
and measures of sub-model t indicate that 50 and
84% of the variation in ACCURACY and USE,
respectively, is explained by contextual and process variables. Relationships between the process
variables are consistent with those reported in
Table 5, although the relation between local managers' involvement and the reward environment is
now marginally signicant. The results are consistent with Foster and Swenson's (1997) proposition
USE
ACCURACY MSUPPORT MINVOLVE USUPPORT
0.03
(.17)
0.47
(2.97)***
0.05
(0.60)
0.00
(0.06)
0.00
(0.00)
R2=0.84
0.14
(1.76) *
0.06
(0.49)
0.19
(3.08)***
0.40
(3.07)***
0.03
(0.31)
0.30
(2.31)**
0.25
(2.22)**
0.04
(0.69)
0.09
(1.87)*
0.25
(3.27)***
R2=0.50
0.11
(1.66)*
0.16
(1.90)*
0.34
(4.91)***
R2=0.31
0.16
(1.78)*
0.04
(0.41)
0.68
(3.40)***
R2=0.31
0.23
(3.19)***
0.08
(0.69)
0.32
(0.009)***
0.22
(0.315)
0.19
(0.033)**
0.40
(0.028)**
0.06
(0.595)
0.30
(0.076)*
0.25
(0.156)
0.04
(0.586)
0.10
(0.092)*
0.27
(0.015)**
0.03
(0.061)*
CFI=0.900 RMSEA=0.044,90% C.I.=[0.037,0.050]
0.18
(0.125)
0.15
(0.399)
0.06
(0.409)
0.85
(0.008)***
0.02
(0.294)
0.03
(0.977)
0.47
(0.034)**
0.05
(0.604)
0.00
(0.845)
0.02
(0.861)
0.01
(0.286)
MINVOLVE USUPPORT RESOURCES ACCURACY USE
0.58
0.58
0.55
0.84
0.68
0.75
0.93
0.53
0.79
0.65
0.64
0.89
0.72
0.69
0.92
All loadings are signicant at 0.01 (two-tail) level.

The sample (N=199) includes all observations for which no more than one item per construct is missing and missing values are imputed as the average value of remaining items in the scale. Two
measures of overall model t are provided: Bentler's (1989) Comparative Fit Index (CFI) and the Root Mean Square Error of Approximation (RMSEA) with its 90% condence interval. Bootstrapping methods (500 samples with replacement) are used to generate approximate p-values (two-tail) for the signicance of the total eects of contextual and procedural variables on ACCURACY
and USE. The p-values are approximations because bootstrapping methods do not make distributional assumptions
Model t statistics R2=0.50
LABOR
REWARD
LAYOFF
IMPPLT
CHANGE
COMMIT
Independent variables
MSUPPORT
0.07
(0.69)
MINVOLVE
0.04
(0.21)
USUPPORT
0.06
(0.78)
RESOURCES
0.85
(4.08)***
INFOQUAL
0.04
Estimated total
eects (approximate
p-values)
&
ACCURACY USE
Estimated direct
eects
0.75
0.37
0.86
0.48
RESOURCES INFOQUAL COMMIT CHANGE IMPPLT LAYOFF REWARD LABOR
1
0.64
0.77
0.84
0.64
0.86
0.68
0.57
2
0.53
0.54
0.65
0.61
0.79
0.54
0.79
3
0.70
0.72
0.68
0.60
0.52
0.72
4
0.55
0.70
5
Panel B: maximum likelihood estimates of the coecients of the structural model and t-statistics (in parentheses)b
Survey
item
Panel A: standardized coecients for the measurement modelsa
Table 6
Maximum likelihood estimation of the relation between contextual and process variables and two components of overall ABC implementation success
547
548
that dierent factors inuence dierent criterion

for evaluating ABC systems. The only process
variable that inuences ACCURACY is adequacy
of resources devoted to the ABC project
(RESOURCES). Notably absent are signicant
direct or indirect eects of top managers, local
managers or the union. This suggests a mechanical
relation, like a production function, linking project inputs to the quality of data outputs. The only
contextual variable associated with perceived
data accuracy is the respondent's felt need for
change in local work practices (CHANGE). The
more that an individual agrees that changes are
needed the more likely they are to ascribe
increased accuracy to ABC data. Notably absent
is a signicant relation between the quality of
existing information systems and accuracy of
ABC data. Combined with the results of Table 5
this suggests that while high quality information
systems may substitute for ABC systems in
meeting managers' information needs, they are
not necessarily complementary in the sense of
providing better data from which to design ABC
systems.
In contrast to ACCURACY, USE of ABC data
is related to top management and union support
of the ABC project and adequacy of resources
devoted to the project. Consistent with the results
of Table 5, local management involvement in the
ABC project appears to play no role in whether
data from the ABC system are used at the site.
Compared to ACCURACY, the attainment of
which is mechanistically related to project inputs,
USE of ABC data depends on both social and
technical factors. Contextual variables that inuence USE include the respondent's commitment to
the organization and felt need for change in the
organization, the likelihood of employee layos
and the reward environment. Together these variables suggest that use of ABC data imposes a large
personal cost on employees. Employees will sustain these costs if they are committed to the organization, if they believe that the organization is
committed to them (low layo prospects) and is
prepared to reward individual performance, and if
they believe that there are opportunities for
enacting changes that will improve performance at
the site.
6. Analysis of model stability

A common concern in case study research is
generalizability of results to dierent organizations. McGowan and Klammer (1997) suggest
that researchers should be equally concerned
about generalizability of results across informants
with dierent levels of involvement in the ABC
project, and Anderson (1995) and Krumwiede
(1998) nd that correlates of ABC system evaluations dier over time. This section investigates the
stability of the estimated model across companies,
respondent types, and ABC systems of dierent
maturity.
Small sub-sample sizes preclude estimating a
latent variable model; consequently, responses to
the items hypothesized to reect latent variables
are summed for each respondent to create manifest indicator variables and a path model is estimated (Bagozzi & Heatherton, 1994). The rst
column of Tables 79 (Model 1) repeats the analysis of Table 6 substituting summated scales for
latent variables. Although the squared multiple
correlations for all of the endogenous variables
declines, overall model t remains good, and the
pattern of signicant variables is consistent with
those for the latent variable model. Model 1 is the
basis for assessing whether distinguishing the
company, the respondent type or the ABC system's maturity leads to a statistically dierent
model of ABC implementation. The sub-sample
models are estimated simultaneously, assuming
common model structure across sub-samples but
allowing all parameter estimates (path coecients,
variances, covariances) to dier.
6.1. Model stability between companies
Table 7 presents results of simultaneously estimating models for each company (Model 2)
allowing the estimated parameters to dier
between the two rms. Overall model t remains
good, and tests of nested models indicate that
there is no signicant loss of t between Model 1
and Model 2 (change in model chi-squared statistic=25.3 with 22 degrees of freedom) (Arbuckle,
1997; Bagozzi & Yi, 1988). Thus, relaxing the
constraints that sub-groups have common model
549
Table 7
Stability of the relation between contextual and process variables and two components of overall ABC implementation success:
company eectsa
Dependent variable
(summated scale)
ACCURACY
USE
MINVOLVE
USUPPORT
RESOURCES
Model t statistics
Independent
variables
Model 1: full sample

(N=199)
Model 2: split by company

Company 1 (N=85)
Company 2 (N=114)
MSUPPORT
MINVOLVE
USUPPORT
RESOURCES
INFOQUAL
COMMIT
CHANGE
IMPPLT
LAYOFF
REWARD
R2=0.19
0.02 (0.32)
0.05 (0.84)
0.01 (0.10)
0.35 (4.55)***
0.01 (0.15)
0.04 (0.78)
0.22 (2.92)***
0.01 (0.16)
0.03 (0.44)
0.02 (0.35)
R2=0.26
0.03 (0.33)
0.00 (0.03)
0.02 (0.20)
0.31 (2.80)***
0.11 (1.14)
0.10 (1.09)
0.40 (2.98)***
0.27 (2.30)**
0.07 (0.65)
0.04 (0.57)
R2=0.24
0.01 (0.106)
0.09 (1.31)
0.03 (0.32)
0.41 (3.88)***
0.08 (1.32)
0.01 (0.24)
0.18 (2.05)**
0.09 (1.48)
0.11 (1.34)
0.03 (0.51)
MSUPPORT
MINVOLVE
USUPPORT
RESOURCES
INFOQUAL
COMMIT
CHANGE
IMPPLT
LAYOFF
REWARD
R2=0.46
0.24 (3.25)***
0.12 (1.82)*
0.30 (3.27)***
0.11 (1.96)**
0.00 (0.01)
0.10 (1.57)
0.20 (2.17)**
0.05 (0.68)
0.23 (2.75)***
0.23 (4.21)***
R2=0.54
0.26(2.60)**
0.05 (0.49)
0.27 (1.96)*
0.14 (1.08)
0.01 (0.09)
0.17 (1.65)
0.19 (1.21)
0.07 (0.54)
0.18 (1.40)
0.35 (4.44)***
R2=0.42
0.17 (1.48)
0.18 (1.95)*
0.31 (2.55)**
0.32 (2.35)**
0.01 (0.10)
0.03 (0.33)
0.23 (1.98)**
0.13 (1.56)
0.29 (2.63)***
0.15 (1.67)*
MSUPPORT
REWARD
INFOQUAL
R2=0.32
0.47 (6.57)***
0.14 (2.41)**
0.17 (2.49)**
R2=0.35
0.50 (4.81)***
0.14 (1.48)
0.07 (0.57)
R2=0.26
0.31 (2.81)***
0.18 (2.35)**
0.23 (2.87)***
LABOR
MINVOLVE
MSUPPORT
R2=0.22
0.09 (1.95)*
0.23 (4.91)***
0.08 (1.53)
R2=0.21
0.01 (0.099)
0.13 (1.92)*
0.17 (2.42)**
R2=0.32
0.20 (3.01)***
0.30 (5.03)***
0.05 (0.62)
MSUPPORT
MINVOLVE
R2=0.18
0.23 (4.80)***
0.06 (1.42)
R2=0.19
0.19 (2.51)**
0.12 (1.63)
R2=0.15
0.26 (3.99)***
0.02 (0.28)
CFI
RMSEA, 90% C.I.
0.951
0.074,[0.44,0.100]
0.948
0.056,[0.030,0.079]
a
Maximum likelihood estimates of the coecients (t-statistics in parentheses) of the direct eects of contextual and process variables on ABC system accuracy and use. To permit the estimation of company and respondent-type sub-models, summated scales
replace the latent variables used in earlier analyses. The full sample (N=199) includes all observations for which no more than one
item per construct is missing and missing values are imputed as the average value of remaining items in a scale. The rst model repeats
the analysis of Table 6 using summated scales. Model 2 examines the sensitivity of the results to company eects.
parameters does not signicantly improve model

t. Path coecients between contextual and process variables and USE and ACCURACY that
were signicant in Model 1 and which remain signicant for both sub-sample models include positive relations between:
550
. perceived ABC data accuracy and adequacy

of project resources;
. perceived ABC data accuracy and respondents' attitude toward change;
. use of ABC data and union support of the
ABC project; and,
. use of ABC data and the perceived reward
environment at the site.
Relationships that were signicant in the pooled
sample, but which appear to be company-specic
include relations between:19
. use of ABC data and top management support, which is conned to company 1; and,
. use of ABC data and local management
involvement, adequacy of project resources,
respondents' attitude toward change, and the
probability of employee layos, which are
conned to company 2.
Most of the path coecients for the portion of
the model relating context and process variables
(lower half of Table 7) remain signicant across
sub-samples. Specically top management support
is positively related to local management involvement, local management involvement is positively
related to union support, and top management
support is positively related to whether adequate
resources are devoted to the ABC project. Relationships that were signicant in the pooled sample, but which appear to be company-specic
include positive relations between:
. the reward environment and management
involvement;
. the quality of existing information systems
and local management involvement; and,
. historical management-labor relations and
union support of the ABC project; all of
which are conned to company 2.
In summary, the structure of the model proves
to be stable across the two rms of our study;
19
Although our knowledge of the companies suggests why
some of these relations might exist, we are not at liberty to
share these casual explanations because they would identify the
companies to a reader with industry knowledge. We have
agreed to attempt to preserve the anonymity of both companies
in all published research results.
however, the magnitude of particular coecients

varies somewhat by rm. Of course these results
provide limited evidence on the question of generalizability of the model to other rms and no
evidence on whether the model would apply in
other industry settings.
6.2. Model stability between managers and ABC
system developers
Table 8 presents results of simultaneously estimating the model for each company (Model 3).
Overall model t is good; however, again tests
indicate that there is no signicant loss of t
between Model 1 and Model 3 (change in model
chi-squared statistic=21.1 with 22 degrees of
freedom) (Arbuckle, 1997; Bagozzi & Yi, 1988).
Thus, relaxing the constraint that sub-groups have
common model parameters does not yield
improved model t. Path coecients between
contextual and process variables and USE and
ACCURACY that were signicant in Model 1
and which remain signicant are:
. perceived ABC data accuracy and respondents' attitude toward change;
. use of ABC data and top management support of the ABC project:
. use of ABC data and union support of the
ABC project;
. use of ABC data and respondents attitude
toward change; and,
. use of ABC data and the perceived reward
environment at the site.
Relationships that were signicant in the pooled
sample, but which appear to be respondent typespecic include relations between:
. accuracy of ABC data and adequacy of
resources provided to the ABC project,
which is conned to managers; and,
. use of ABC data and adequacy of project
resources and the probability of employee
layos, which are conned to ABC system
developers.
In the case of ACCURACY, it is likely that
ABC project developers have an incentive to uniformly claim inadequacy of resources since data
551
Table 8
Stability of the relation between contextual and process variables and two components of overall ABC implementation success:
manager and ABC developer eectsa
Dependent variable
(summated scale)
ACCURACY
USE
MINVOLVE
USUPPORT
RESOURCES
Model t statistics
Independent
variables

(N=199)
Model 3: split by respondent

Managers (N=123)
ABC developers (N=760
MSUPPORT
MINVOLVE
USUPPORT
RESOURCES
INFOQUAL
COMMIT
CHANGE
IMPPLT
LAYOFF
REWARD
R2=0.19
0.02 (0.32)
0.05 (0.84)
0.01 (0.10)
0.35 (4.55)***
0.01 (0.15)
0.04 (0.78)
0.22 (2.92)***
0.01 (0.16)
0.03 (0.44)
0.02 (0.35)
R2=0.30
0.06 (0.83)
0.15 (2.06)**
0.00 (0.03)
0.37 (3.30)***
0.17 (2.37)**
0.00 (0.02)
0.28 (2.98)***
0.01 (0.08)
0.13 (1.48)
0.04 (0.65)
R2=0.23
0.03 (0.30)
0.02 (0.23)
0.03 (0.26)
0.14 (1.41)
0.11 (1.52)
0.14 (1.61)
0.25 (2.32)**
0.01 (0.13)
0.06 (0.58)
0.05 (0.69)
MSUPPORT
MINVOLVE
USUPPORT
RESOURCES
INFOQUAL
COMMIT
CHANGE
IMPPLT
LAYOFF
REWARD
R2=0.46
0.24 (3.25)***
0.12 (1.82)*
0.30 (3.27)***
0.11 (1.96)**
0.00 (0.01)
0.10 (1.57)
0.20 (2.17)**
0.05 (0.68)
0.23 (2.75)***
0.23 (4.21)***
R2=0.38
0.17 (1.70)*
0.10 (1.05)
0.34 (2.63)***
0.05 (0.36)
0.19 (1.96)*
0.07 (0.86)
0.21 (1.73)*
0.06 (0.68)
0.12 (0.99)
0.22 (3.07)***
R2=0.67
0.37 (3.47)***
0.14 (1.62)
0.27 (2.46)**
0.20 (1.77)*
0.13 (1.58)
0.06 (0.67)
0.30 (2.48)**
0.09 (0.80)
0.45 (4.21)***
0.18 (2.27)**
MSUPPORT
REWARD
INFOQUAL
R2=0.32
0.47 (6.57)***
0.14 (2.41)**
0.17 (2.49)**
R2=0.30
0.48 (5.51)***
0.07 (0.99)
0.16 (1.64)*
R2=0.36
0.53 (4.47)***
0.12 (1.17)
0.08 (0.78)
LABOR
MINVOLVE
MSUPPORT
R2=0.22
0.09 (1.95)*
0.23 (4.91)***
0.08 (1.53)
R2=0.25
0.13 (2.61)***
0.20 (3.37)***
0.09 (1.47)
R2=0.18
0.08 (0.75)
0.22 (2.63)***
0.09 (1.05)
MSUPPORT
MINVOLVE
R2=0.18
0.23 (4.80)***
0.06 (1.42)
R2=0.25
0.14 (2.60)***
0.19 (3.65)***
R2=0.18
0.31 (3.51)***
0.03 (0.39)
CFI
RMSEA, 90% C.I.
0.951
0.074, [0.044,0.100]
0.957
0.052, [0.024,0.075]
a
Maximum likelihood estimates of the coecients (t-statistics in parentheses) of the direct eects of contextual and process variables
on ABC system accuracy and use. To permit the estimation of company and respondent-type sub-models, summated scales replace the
latent variables used in earlier analyses. The full sample (N=199) includes all observations for which no more than one item per construct is missing and missing values are imputed as the average value of remaining items in a scale. The rst model repeats the analysis
of Table 6 using summated scales. Model 3 examines the sensitivity of the results to company eects.
accuracy may be viewed as reecting the quality of

ABC system development work. Similarly, managers, who are typically responsible for using ABC
data, have an incentive to attribute their failure to
use the data to inadequacies in the project development. In summary, in appears that opinions
about resource adequacy for the project may be
shaped by respondents' incentives to shift blame
552
Table 9
Stability of the relation between contextual and process variables and two components of overall ABC implementation success: eects
of ABC system maturitya
Dependent variable
(summated scale)
ACCURACY
USE
MINVOLVE
USUPPORT
RESOURCES
Model t statistics
Independent
variables

(N=199)
Model 4: split by model maturity

Mature models (N=97)
Recent models (N=102)
MSUPPORT
MINVOLVE
USUPPORT
RESOURCES
INFOQUAL
COMMIT
CHANGE
IMPPLT
LAYOFF
REWARD
R3=0.19
0.02 (0.32)
0.05 (0.84)
0.01 (0.10)
0.35 (4.55)***
0.01 (0.15)
0.04 (0.78)
0.22 (2.92)***
0.01 (0.16)
0.03 (0.44)
0.02 (0.35)
R3=0.21
0.02 (0.22)
0.06 (0.79)
0.11 (1.12)
0.34 (3.21)***
0.03 (0.39)
0.10 (1.13)
0.23 (2.22)**
0.14 (1.53)
0.01 (0.04)
0.00 (0.04)
R2=0.23
0.01 (0.07)
0.03 (0.35)
0.13 (1.21)
0.35 (3.13)***
0.03 (0.40)
0.04 (0.57)
0.26 (2.44)**
0.05 (0.66)
0.09 (1.04)
0.04 (0.51)
MSUPPORT
MINVOLVE
USUPPORT
RESOURCES
INFOQUAL
COMMIT
CHANGE
IMPPLT
LAYOFF
REWARD
R2=0.46
0.24 (3.25)***
0.12 (1.82)*
0.30 (3.27)***
0.11 (1.96)**
0.00 (0.01)
0.10 (1.57)
0.20 (2.17)**
0.05 (0.68)
0.23 (2.75)***
0.23 (4.21)***
R2=0.56
0.35 (3.87)***
0.13 (1.39)
0.29 (2.53)**
0.02 (0.16)
0.07 (0.86)
0.09 (0.94)
0.17 (1.47)
0.15 (1.40)
0.22 (1.47)
0.25 (3.57)***
R2=0.45
0.11 (0.93)
0.08 (0.86)
0.35 (2.52)**
0.46 (3.29)***
0.16 (1.63)
0.12 (1.42)
0.14 (1.98)**
0.05 (0.54)
0.28 (2.54)***
0.14 (1.67)*
MSUPPORT
REWARD
INFOQUAL
R2=0.32
0.47 (6.57)***
0.14 (2.41)**
0.17 (2.49)**
R2=0.21
0.31 (3.14)***
0.16 (2.02)**
0.07 (0.75)
R2=0.42
0.64 (6.39)***
0.09 (0.98)
0.30 (2.90)***
LABOR
MINVOLVE
MSUPPORT
R2=0.22
0.09 (1.95)*
0.23 (4.91)***
0.08 (1.53)
R2=0.26
0.08 (0.98)
0.32 (4.54)***
0.06 (0.80)
R2=0.17
0.09 (1.27)
0.14 (2.24)***
0.11 (1.53)
MSUPPORT
MINVOLVE
R2=0.18
0.23 (4.80)***
0.06 (1.42)
R2=0.11
0.20 (3.01)***
0.02 (0.24)
R2=0.27
0.28 (3.88)***
0.09 (1.55)
CFI
RMSEA, 90% C.I.
0.951
0.074, [0.044, 0.100]
0.922
0.068, [0.045,0.090]
a
Maximum likelihood estimates of the coecients (t-statistics in parentheses) of the direct eects of contextual and process variables on ABC system accuracy and use. To permit the estimation of two sub-models, summated scales replace the latent variables used
in earlier analyses. The full sample (N=199) includes all observations for which no more than one item per construct is missing and
missing values are imputed as the average value of remaining items in a scale. The rst model repeats the analysis of Table 6 using
summated scales. Model 4 examine the durability of relations estimated in the model by segmenting the data into two roughly equal
sized groups based on the date when the rst ABC model was completed. Ten sites where ABC was implemented prior to May 1993
are termed ``mature'' implementations, while those that completed ABC implementation during the latter part of 1993 and 1994 are
termed ``recent'' implementations relative to the 1995 data collection period.
for failure to obtain more accurate data from the

ABC system or failure to use ABC data after the
system is developed.
Most of the path coecients for the portion of
the model relating context and process variables
(lower half of Table 8) remain signicant across
sub-samples. Specically top management support
is positively related to local management involvement, local management involvement is positively
related to union support, and top management
support is positively related to whether adequate
resources are devoted to the ABC project. Signicant relationships in the pooled sample that
appear to be respondent specic include positive
relations between:
. the quality of existing information systems
and local management involvement; and,
. historical management-labor relations and
union support of the ABC project;
both of which are conned to managers. Managers have a dierent perspective on the quality
of existing information systems and historical
managementlabor relations. ABC developers
may be inclined to evaluate information systems
based on whether they contain data that are useful
in ABC system design and are unlikely to be
informed about management-union relations. In a
few cases developers are union members themselves. In sum, ABC developers are either uninformed or from a suciently dierent population
of respondents to draw into question the comparability of their responses to these survey items and
those of managers.
6.3. Model stability between older and more recent
ABC implementations
Assessing the eects of maturity of the ABC
system on respondents' evaluations of the systems
requires separating the ABC sites into dierent
``generations''. The model of six ``stages'' of ABC
implementation developed in Anderson (1995) and
tested by Krumwiede (1998) suggests separating
sites based on which stage is attained by the time
of data collection. Since we study only sites that
rst implemented ABC after ABC was adopted as
a rm initiative and since we conducted the study
553
before either rm completed implementation and

integrated ABC with other information systems,
the sites are in either the `àdaptation'' stage or the
`àcceptance'' stage. As its name suggests, adaptation is the period following completion of an ABC
system when the site becomes familiar with the
technology and adapts the ABC system to local
circumstances and information needs. In the
acceptance stage, the structure of the ABC system
is stable and the system is maintained and updated
as becomes necessary.
For purposes of testing the eect of system
maturity on the model, we split the sample into
sites that rst completed an ABC system prior to
May 1993 (what we term ``mature'' ABC systems)
and those that completed an ABC system thereafter (``recent'' implementations). This split
results in 10 sites (ve from each rm) being designated ``mature''. The choice of mid-1993 as the
dividing point is guided by two facts. First, most
sites use ``templates'' of an ABC system (e.g. cost
centers and cost drivers) from a similar plant to
guide the development of the rst ABC model.
After ABC data are obtained and studied by managers, it is common for the structure of the system
to be modied somewhat in the rst major system
update. Thereafter, the structure of the model
tends to be changed only when major physical
changes in the plant or its product mix necessitate
it. Second, the sites develop ABC models that
assign costs from a particular scal year to products. Those who begin implementing ABC late in
a year typically assign the current year budgeted
costs, (perhaps modied to reect year-to-date
actual costs) to the planned product mix. Those
who begin implementing ABC early in the year
typically assign the previous year's actual costs to
actual output. Consequently, sites that complete
development of the rst ABC system after May
1993 updated their system one time prior to our
data collection in 1995 while sites that completed
development of an ABC system between 1990 and
mid-1993 did several system updates. We believe
that most changes to system structure (adaptations) occur in the rst system update, thus this
division of sites is a proxy for whether sites are in
the acceptance (e.g. ``mature'') or adaptation (e.g.
``recent'') stage of implementation.
554
Clearly, model maturity also proxies for dierences in the opportunity that managers from the
two sub-samples have had to act on the ABC data.
If the costs of developing ABC systems represent a
certain, signicant outlay that is concentrated
during system development while benets of ABC
data are uncertain and dispersed over an indeterminate future, respondents from sites with
mature ABC systems will have more accurate
information about the benets of ABC implementation.20 Model maturity also confounds any
priority basis that the rms may use to target sites
for implementation. Although sites were given
some freedom to implement ABC at a convenient
time, both rms implemented ABC rst in large
plants with complex products and processes. We
are unable to separate the confounding eects of
what the respondent knows about costs and benets of ABC implementation, the rm's priority
scheme for implementing sites, and the ``stage'' of
model development. Some of these issues could be
fruitfully explored in future research using an
experimental setting.
Table 9 presents the coecients for simultaneously estimating the model for mature and
recent implementations of ABC (Model 4). Unlike
the previous cases, tests indicate that there is signicant loss of t between Model 1 and Model 4
(change in model chi-squared statistic=33.9 with
22 degrees of freedom) (Arbuckle, 1997; Bagozzi
& Yi, 1988). Consequently constraining the models of evaluation of mature and recent implementations to be identical is inappropriate. The
major dierences are in the portion of the model
that relates contextual and process factors to USE
of the ABC data for cost reduction. The portions
of the model related to ACCURACY are remarkably stable, as are the portions of the model that
relate contextual factors to the process of ABC
implementation (lower half of Table 9).
Stable determinants of ACCURACY suggest
that assessment of accuracy is a natural artifact of
installing any ABC system and neither subsequent
20
Of course time and employee turnover may also attenuate
respondents' perceptions, so respondents from mature sites
may have less accurate information about the costs of implementation.
revisions to the system nor a respondent's re-evaluation of accuracy dramatically change the
underlying model. In short, the model of ACCURACY is ``durable'' unaected by dierent
stages of implementation, by rms priority for
implementing at the site or by changes in respondents' information about costs or benets of
implementation. Similarly, the relation between
contextual factors and the process of ABC implementation appears to be quite stable. The reward
environment appears to have played a more
important role in local management involvement
during early ABC implementations, while the
quality of existing information systems played a
more important role in local management involvement in later ABC implementations. This seems
to suggest dierences between the types of plants
that were chosen or that volunteered to implement
ABC early rather than late; however, as noted
earlier we can not unambiguously rule out other
explanations.
Turning to determinants of USE, the model
diers substantially between mature and recent
implementation sites. Since USE is something that
emerges (or doesn't) over time after completion of
the ABC system, it is reasonable that this measure
of ABC implementation eectiveness is vulnerable
to model instability over time. For sites with
mature implementations, respondents' assessment
of USE is related signicantly to top management
support, union support and the reward environment. For sites with more recent implementations,
USE is also related to union support and to the
reward environment; however, it is not related to
top management support and the reward environment has a smaller inuence than for mature sites.
In addition to these factors, adequacy of resources, respondents' commitment to change, and the
likelihood of layos are determinants of USE in
this setting. Dierences in the role of top management are consistent with top management taking
pains to promote the ABC program early in its
existence but becoming less visible as implementation proceeds. These dierences are also consistent
with mature sites experiencing pressure to use the
data that sites with more recent implementations
have not yet experienced a shift in top managers'
expectations that occurs with model maturity. The
former explanation points to real dierences in the

implementation experience of early versus late
adopters while the latter explanation points to
dierences that stem from the stage of implementation of the site. The data do not permit us to
distinguish between these explanations.
Among the other determinants of USE that differ between the two sub-samples, only the eect of
RESOURCES is quite dierent in magnitude and
signicance. (Commitment to change and the
likelihood of layos are marginally signicant
even for the mature sites and the magnitude of the
path coecients is similar.) Since RESOURCES
refers to the project resources associated with
ABC system development, this result seems to
suggest that mature sites no longer depend on the
ABC development team (or maintenance team) to
drive the use of the ABC data. This interpretation
is consistent with the hypothesis advanced by
Cooper et al. (1992), that moving from 'implementation to action' requires a dierent group of
people to become involved in using ABC data
than was involved in creating the data.
A more fundamental cause of the delays in
taking action may have been inadequate preparation of the organization for changes in
thinking and decision making. . . The most
successful projects occurred when a specic
target for change was identied early in the
project . . . The target was the person or group
whose decisions were expected to change as a
consequence of the information (p. 8).
That recent implementations rely heavily on
ABC developers to promote use of the data hints
at a transition period during which those who are
familiar with the system help users to identify
problems to which the system lends itself.
In summary, stability of the model of determinants of ABC system eectiveness over time
depends upon the measure of eectiveness that
one considers. The relations between contextual
and process factors and between these factors and
ACCURACY are quite stable. The relation
between these factors and USE is not stable. We
can not unambiguously distinguish between
explanations related to real dierences in the
555
implementations of early versus late adopters, differences in the implementation stages that early
and late adopters are in at the time of our data
collection, and dierences in the knowledge that
respondents have about ABC implementation and
its subsequent outcomes. All of these explanations
are plausible and have distinct implications for
managing ABC implementation. Consequently,
future research aimed at disentangling these factors
is warranted.
7. Conclusion
This study extends a large body of empirical
research that has examined factors that promote
adoption and satisfaction with activity based
costing. The primary research contributions are
proposing and testing a model that links previous
research to ``process theories'' of ABC implementation and examining the stability of the
model across several settings. Process theories
hypothesize that, in additional to contextual factors related to the environment and to characteristics of the individual rendering the assessment,
evaluations of ABC systems are related to the
process by which the organization develops and
gains employee support for the systems. We separate factors previously found to be correlated with
ABC system evaluations into two categories
those that reect the contextual setting in which
the evaluation is performed and those that reect the
process of managing the ABC implementation project. These two categories are used to explore a premise of process theories; specically, that contextual
and process factors inuence ABC system evaluations and that contextual factors also inuence the
process of ABC project management.
We nd that although the process of implementation clearly inuences the outcomes of an
ABC implementation, both the process and the
outcomes are directly inuenced by the contextual
setting. For example, managers are more likely to
support the ABC implementation process when
good performance is viewed as likely to yield
rewards (e.g. high reward expectancy). Independent
of involvement in the process, evaluators are also
more likely to evaluate the ABC system positively in
556
environments with high reward expectancy. In the

face of ABC implementation failures, practitioners
have focused on improving the process by which
ABC is implemented. As the above example illustrates, in many cases the impediment may be the
contextual environment. Improving the implementation process may attenuate the indirect
eect of the contextual environment acting
through the implementation process; however, it
will not aect the direct association between the
contextual environment and evaluations of the
ABC system. As Malmi (1997) argues, in some
settings ABC is simply unlikely to thrive regardless of how skillfully the implementation is managed. After establishing the process theory model as
a plausible description of the underlying datagenerating process, we turn to issues of model
stability across alternative evaluation measures
and dierent subsamples.
Foster and Swenson (1997) document dierent
correlates of dierent measures of ABC system
eectiveness. We provide evidence that respondents' use dierent criterion to evaluate ABC systems. Content analysis of interview transcripts
reveals two widely held views that ABC systems
are valuable if they provide more accurate cost
data than the traditional cost system or if ABC
data are used for cost reduction or process
improvement. The respondent's job title is the
only signicant factor in explaining dierences in
opinions. Respondents with jobs that are closely
linked to production operations are more likely to
evaluate the ABC system against a criterion of
data accuracy, while respondents in support functions are more likely to require evidence of use in
cost reduction.
Examining the stability of the model of ABC
evaluation relative to these two evaluation criteria,
we nd that evaluations of data accuracy and use
are associated with dierent contextual and process factors. Perceived accuracy of ABC data is
related positively to the adequacy of resources
devoted to system development and beliefs of the
respondent that change is needed. Use of ABC
data is inuenced by a wider array of contextual
and process variables, including: top management
and union support of the ABC project, adequacy
of project resources, the respondent's commitment
to the organization, the likelihood of layos, and the

degree to which good performance is expected to be
rewarded. Achieving increased cost accuracy
depends on a relationship that resembles a production function accuracy of data outputs is related
to the quality of project inputs. In contrast, use of
ABC data depends upon a wider array of contextual
and process factors. In sum, because both evaluation criteria share one common determinant
resource adequacy of the ABC project which is
positively related to both outcomes, we conclude
that these evaluation criteria are neither mutually
exclusive (e.g. requiring dierent processes or contexts) nor perfectly correlated. Although ABC systems that are used for cost reduction are likely to be
viewed as accurate, the attainment of accuracy is not
a sucient condition to insure use.
A nal contribution of the paper is investigation
of three forms of model instability: rm eects,
respondent eects, and eects of ABC system
maturity. Although the coecients of particular
variables dier somewhat between rms and
respondents, we reject the hypothesis that rm or
respondent specic models better t the data. Stated dierently, removing the constraint that the
model coecients are identical across subsamples
does not improve model t more than could be
expected by chance. In contrast, separating our
sample into mature and recent implementations of
ABC leads to signicantly dierent models; however, the dierences are concentrated in the portion of the model related to use of ABC data. The
portion of the model that relates contextual factors to the implementation process and that which
relates both types of variables to accuracy of the
ABC data are stable for both groups. Dierences
in the model of ABC system use appear related to
the role of the ABC development team. For
mature ABC systems, use depends on management support and the reward environment. For
recent implementations, use is more closely tied to
the ABC development team.
In summary, this paper unites a theoretical literature that portrays ABC implementation as an
organizational change with an empirical literature
that documents correlates of ABC implementation
outcomes but remains agnostic about the cause of
these relations. The design of the research program
distinguishes this study from previous empirical

work and provides the opportunity to explore
more fully issues raised in prior studies. Nonetheless, important limitations remain and, as in
the prior studies, the analysis raises new questions.
Obvious limitations include studying two rms
from a single industry, assuming that the data
reect opinions and attitudes of respondents who
are informed and truthful, and relying exclusively
on attitudinal data that are not calibrated against
objective data. We provide evidence on the
robustness of our results across company and
respondent-type subgroups; nonetheless, the
empirical results may not generalize to other rms,
other industry settings or other informants.
Although we identify respondents who are
believed to be informed and use methods aimed at
reducing random responses and mitigating measurement error, we remain vulnerable to systematic response bias. Limitations associated with
attitudinal data reect widespread disagreement
among researchers about how to measure performance of cost systems as well as the fact that
many of the variables are fundamentally latent
(unobserved). Although objective measures should
be used at every opportunity to augment attitudinal data, we are as skeptical about the measurement properties of `òbjective'' measures as we are
of any single survey question.
Three opportunities for future research emerge
from this study. The management accounting literature on ABC implementation employs a macro
view of the implementation process. Since we use
the organizational literature to frame the study of
ABC implementation, it is natural to draw on a
related literature, the organizational literature on
project management, to examine how the work of
ABC development teams aects project outcomes.
An unchallenged assertion of many consultants is
that ABC development should be done by a multidisciplinary team. It is time for researchers to
investigate the development process to determine
whether dysfunctional aspects of team production
arise during the development of ABC systems and
whether on balance, multi-disciplinary teams yield
dierent, better outcomes.
A second issue follows from our discovery that
models of ABC system evaluation vary with time
557
and our inability to distinguish between several

explanations for this. Specically, the research
design did not permit us to distinguish whether differences are caused by a change in respondents'
uncertainty about the costs and benets of ABC
implementation, by real unmeasured dierences
between sites that self-selected into the early implementation group, or by dierences associated with
the maturing process. An experimental research
approach might be able to disentangle these eects.
Finally, two opportunities exist for the
researcher who can enlarge the research sample by
either including more rms while retaining multiple sites at each rm, or by including a broader
cross-section of employees at each site. The rst
approach would make possible a more thorough
investigation of the inuence of rm-specic contextual variables on dispersed implementation
sites. The second approach would allow us to disentangle the eects of role involvement in the
ABC project and the evaluator's level in the organizational hierarchy. Our study, which uses informants that dier along both of these dimensions,
confounds these explanations for why respondents
hold dierent views of the ABC system.
Acknowledgements
The Foundation for Applied Research of the
Institute of Management Accountants provided
nancial support for this project and J. Freedman,
Director of Research of IMA, provided project
assistance. The authors acknowledge research
support from their universities and the rst author
acknowledges nancial support from the International Motor Vehicle Program at M.I.T. and from
Arthur Andersen. We are grateful to management
at both companies for providing access to data.
We also acknowledge contributions of our
research assistants: S. Abraham, T. Colony, D.
Daly, J. Hesford, and S. Rice. Finally, we thank S.
Ansari, R. Bagozzi, J. Core, J. Deng, M. Gupta,
R. Kaplan, W. Lanen, J. Luft, T. Shevlin, M.
Shields, N. Soderstrom and workshop participants
at Harvard Business School, University of Rochester, Washington University, University of Southern California, Michigan State University,
558
University of Washington, Memphis University,

and the June 1997 EIASM conference, for comments
on the paper.
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The Impact of Contextual and Process Factors On The Evaluation of Activity Based Costing Systems 1999 Accounting Organizations and Society

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Accounting, Organizations and Society 24 (1999) 525559

The impact of contextual and process factors on the

Early proponents of ABC claimed superiority

(Chenhall & Langeld-Smith, 1998; Foster &

lates (Foster & Swenson, 1997), it is appropriate

responsibility for ABC implementation, or as a

1990; Cooper et al., 1992; Drumheller, 1993; Eiler

Individual received ABC training

there is little correspondence between empirical

Fig.1. Structural model of ABC implementation.

1.1 evaluations of ABC systems and contextual

experimentation and evaluation of alternative cost

for inventory valuation until all sites installed ABC

widely diering project outcomes or biases of top

against the rm directing us to relatively successful

3.3. Data collection

See Pedhazur and Schmelkin (1991) for a discussion of

Other: service parts distribution

than does Company 1 evidenced by fewer years

4. Measurement of variables and process structure

used to capture this potential deterrent to ABC

column 6. The hypothesized structure between the

An analysis software package designed for non-numerical,

researcher and research assistant independently

Despite the implementation challenges, I am convinced that ABC is the

MINVOLVE: local management knowledge of and involvement in ABC

Measures of ABC implementation success

(continued on next page)

The working environment at this plant changes constantly

LAYOFF: history of employee layos

NOGROW: impediments to plant growth

TURB: environmental turbulence

INFOQUAL: quality of other information systems

RESOURCES: adequacy of resources for the ABC development project

USUPPORT: union support

Most managers of the plant were involved in determining how thei

COMMIT: commitment to the organization

VALUES: shared organizational values

In this plant, high quality work increases my chances for a raise,

REWARD: reward expectancy

Changes in the way we work in this plant are needed

CHANGE: felt need for change

This plant's cost reduction eorts are important to the company

At this plant the union and management have similar goals

We have diculty getting authorization to hire replacements for

IMPPLT: importance of the plant to company

LABOR: quality of labor relations

X intercept 1 Firm 2 SiteFirm 3 RespondentSiteFirm "

an assessment, and (2) apprehension about

Earlier we argued that individuals are the

the signicance of each eect indicates signicant

measurement model, which relates the survey items

that are associated with evaluations of the ABC

The results indicate that three process variables

CFI=0.932 RMSEA=0.054, 90% C.I.=[0.039,0.068]

Total eects (approximate p-value)

All loadings are signicant at 0.01 (two-tail) level.

the structural model t-statistics (in parentheses)b

Estimated direct eects

cients is consistent with previous studies; however,

ACCURACY and OVERALL is 0.40 (p <0.01),

ACCURACY MSUPPORT MINVOLVE USUPPORT

MINVOLVE USUPPORT RESOURCES ACCURACY USE